Coca Cola HBC AG
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Coca Cola HBC AG
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Thank you for standing by, ladies and gentlemen, and welcome to Coca-Cola HBC's conference call for the 2020 third quarter trading update. We have with us Mr. Zoran Bogdanovic, Chief Executive Officer; Mr. Michalis Imellos, Chief Financial Officer; and Ms. Joanna Kennedy, Investor Relations Director. [Operator Instructions] I must also advise that this conference is being recorded today, Wednesday, November 11, 2020. I now pass the floor to one of your speakers, Ms. Joanna Kennedy. Please go ahead.
Good morning, everyone. Welcome to our third quarter trading update. I'm joined today by our CEO, Zoran Bogdanovic; and our CFO, Michalis Imellos. 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 brief opening remarks from Zoran, and then open the floor to your questions. [Operator Instructions] 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 will turn the call over to Zoran.
Thank you, Joanna. Good morning, everyone. I sincerely hope that you and your loved ones are well and safe. Let me start by reiterating what remains central and that is our commitment to ensuring the safety of our people, customers, partners and communities. I continue to be inspired by the resilience, agility, and strong drive of our people as well as the genuine care they have for each other and this business. This quarter has required continued rapid adjustment to the changing environment and the results that we have reported today, particularly the ongoing strong market share performance are clear evidence of the strength of the business as well as the capabilities and contagious passion of the people who make it what it is. And I want to thank them wholeheartedly. Coca-Cola HBC is a well-positioned and resilient business with a clear vision and purpose. Although we know that the recovery from the pandemic will not be simple or straightforward, we are encouraged by the significantly improved performance of our business during the third quarter. These results as well as the agility that I have witnessed in the organization and the speed with which we have adopted, gives me confidence that we will emerge stronger and smarter from this experience. Able to leverage our scale to capture the growth opportunities ahead. Let me now give you an update on our performance in Q3, including our progress on sustainability, followed by an update on our trading in October. During the third quarter, we have seen sequential improvement in revenue trends. Third quarter revenue declined by a 30 basis points on a like-for-like basis, a notable improvement from the 1.2% decline in the first quarter and a 25% decline in the second. Volumes grew by 1% in the quarter and were positive in both August and September. 2 of our 3 segments were in growth with some of our largest markets showing strongly improved trading, in particular, Nigeria, up in the low-20s, Russia up low-teens and Poland, up high single-digit. Price/mix trends also improved markedly, down 1.2% compared to a decline of 4.1% in the first quarter and 7.7% in the second. The most important driver of this improvement was from better performance of single-serve package formats, in turn, due to improved trends in the out-of-home channel. Single-serve mix declined by 1.3 percentage points in the third quarter compared to a decline of 7.6 percentage points in the second. We saw successive improvement in trading in the out-of-home channel, In April, out-of-home volumes were down in the range of 70% to 90%. This improved to 25% to 50% in the month of May and June, and during the third quarter, reached declines in the high single digits, showing significant sequential improvement. Overall, during the quarter, 80% to 90% of the outlets we serve in the out-of-home channel were open and operating, albeit at lower capacity than usual due to limited opening hours, outdoor restrictions or table-only service. What is also supporting performance is a strong result from the at-home channel. We saw the at-home channel returned to growth in July. And during the third quarter, it grew by mid-single digits. We see that consumers are adapting to the circumstances and that at-home occasions such as meals, socializing, working and screen time at home have grown in size and that we are winning share here. Year-to-date, we have gained 40 basis points of market share. We are also seeing significant growth in e-commerce, and there are several ways in which we address that. First, through our own B2B platform, where we have seen sizable increases to online orders, which has continued even after the lockdowns. Second, through partnering with our existing omni-channel customers to increase our digital shelf space and visibility on their own e-commerce websites; and through working with newer digital-only customers, such as food aggregators to increase the beverage penetration in food orders. And finally, we have our own experience with D2C platforms in Switzerland, which proves valuable learning opportunities in this rapidly growing part of the market. Now let me take you through the main drivers of FX-neutral revenue performance on a segmental basis. Established markets currency-neutral revenue declined by 5.4%. Overall, volume declined by 8.6%. Within the segment, we have seen most markets in the range of low to mid-single-digit volume decline, while Greece has been an outlier, seeing volumes down double-digit as their third quarter was heavily impacted by a decline in international tourism in the country. Italian volumes were relatively resilient, down mid-single digit, supported by growth in the at-home channel. We saw strong price/mix this quarter, up 3.5%, driven by strong category mix as well as positive geographic mix and price increases in several markets. Developing markets, FX-neutral revenue declined by just 10 basis points. Overall, volume grew by 2.5%. The segment remains less exposed to the out-of-home channel and international tourism, of course, with a notable exception of creation. Poland's performance has been particularly strong with high single-digit volume, growth and share gains of 1.8 percentage points in sparkling year-to-date. Along with volume growth, we have delivered a much improved performance on price/mix. As you may remember, price/mix in the developing segment in the first half was impacted by the strategic decision we made before the outbreak to have less contribution to growth from pricing this year after several years of strong price/mix development. Despite this, our effective work on promo management as well as selective pricing early in the year in several markets has allowed us to deliver better price/mix performance in the third quarter. Down 2.6%, a notable improvement compared to the first half when price/mix was down 8.2%. Emerging market's currency-neutral revenue grew by 4.2% like-for-like, with price/mix down 1.5% and volumes up 5.8%. This positive result was driven by strong performance in the 2 largest markets in the segment: Russia and Nigeria. Russian volumes grew by low-teens. We have seen the non-alcoholic ready-to-drink category return to growth, led in particular by sparkling, where we have gained over 1 point of share year-to-date. Sparkling volumes were led by trademark Coca-Cola and very strong growth in Schweppes, which grew volumes by nearly 40%. Our focused work on building our revenue growth management capabilities in the market has enabled this positive result, allowing us to win in the market with affordable entry pack offerings, while also benefiting from Adult Sparkling premiumization opportunities. Nigerian volumes grew in the low-20s, with very strong sparkling volume growth. Outside of April and May, we have seen consistent double-digit volume growth in Nigeria, which shows that the strategic choices we made around pricing and route-to-market investments are working. We also see that the development of capabilities around big data and advanced analytics in the market is increasing our understanding of demand and ensuring strong availability of the right products in the right place at the right time. In Nigeria, where demographics enter capita consumption leave so much room for growth. This ability is a critical enabler to unlock the long-term growth potential in the market. We continue to see the power of sparkling category in our performance. Sparkling volumes grew by 5.4%, with growth in Coke, Fanta and Sprite. Adult Sparkling volumes were up by 10%, boosted by the consistent trend of growth in the socializing at home occasion, and energy continues to outperform, with volumes up nearly 25% in the quarter. Stills volumes declined by 9.9% like-for-like, a significant improvement from the 37% decline we saw in Q2. Our Stills portfolio and especially water over-indexed to the out-of-home channel. This fact, which is normally a strength as it allows us to generate better revenue per case from water and other Stills categories has had a negative impact on performance during 2020. As we advance towards our vision to be the leading 24/7 beverage partner, we are always conscious that this cannot be achieved without the full integration of environmental, social and governance considerations into our strategy and practically everything we do. We manage this business for the long term. And that requires careful and balanced decision-making around how we use resources. We continue to push ahead on our sustainability commitments. For example, even as we saw business activity increase, we also increased the proportion of renewable and clean energy, which powers us by 2 percentage points compared to the prior year period. We also continue to make significant steps forward in the implementation of our world without weight sustainable packaging strategy. As you may know, efficient and effective collection systems are crucial to delivering a circular economy on packaging, ensuring that no package has only 1 life, and this year, as part of our commitment to collect 100% of our primary packaging for recycling or reuse by 2030, we have supported collection modeling studies in 9 of our countries to identify and advocate for the optimal systems for the efficient collection of beverage containers. When it comes to October, we saw trading continue in recovery territory. Volumes in the month declined by 1.8%, considering that we were cycling high single-digit volume growth in 2019, we were encouraged by this performance. However, it must be noted that we face an even higher comparator for the remaining months of Q4. Q4 '19 volume growth was 8.3%. We have seen recent increases in infection rates as well as government restrictions in some of our markets. We are constantly monitoring this situation so that we can manage our business to perform optimally in the evolving environment. While we recognize the uncertainties. At the same time, we are also conscious of 2 positive factors. The first is that the fourth quarter is less driven by out-of-home performance and certainly less by tourism. The second is that, at the moment, not all of our volumes are impacted by these restrictions. Let me give you a sense of the latter point. We could grow our markets into 4 categories when it comes to policies on HoReCa: first, those with limited restrictions in HoReCa besides reduced capacity; second, those with limited trading hours; third, those which have regional closures of HoReCa; and finally, fourth, those with national closures in place. So far, we see that over half of our volumes fall into the first 2 groups that is with limited restrictions or some limit on trading hours. Now moving on to the more heavily restricted areas. Ireland, Poland, Italy and Switzerland are within the third group with regional closures of HoReCa and the Czech Republic, Slovakia, Greece, Austria, Hungary, Slovenia and Lithuania, are in the fourth with national closures in place. The markets in the last 2 groups represent less than half of our total volumes in 2019. And of this, nearly half is from the markets with lower exposure to the out-of-home. We are continuously monitoring the situation and the flexibility of our commercial strategy means that we remain poised to adjust our investments and approach to maximize our opportunities. This together with our continuous focus on strengthening our capabilities, means that depending on what we see in our markets, we can rapidly adopt by rerouting our sales force, adjusting our supply chain and our marketing spend to allow us to continue to win in this very dynamic market environment. Finally, in the current environment, cost control is crucial and have delivered extremely well against our initial plan to save EUR 100 million of discretionary OpEx. We have announced today that we have increased this target by EUR 20 million for the full year. In conclusion, while alert to the risks of additional outbreaks of the virus in our market, we are also encouraged by the strong business results as well as the consistent growth we have seen in the at-home channel, which will be especially important for this final quarter. Combined with the increasing impact of our cost saving programs, we believe that this should allow us to deliver good profitability in a severely disrupted year. Thank you for your attention. And I will now hand over to the operator, and Michalis and I will take any questions you may have.
[Operator Instructions]And we do have a couple of questions in the queue. The first question comes from the line of Edward Mundy from Jefferies.
Three questions for me. The first question is for Zoran. I appreciate that the recovery is not going to be straightforward. But does the rebound in Q3 increase your confidence that consumer appetite for out-of-home experiences will be strong on the other side of the pandemic?
Ed, listen, my intuitive answer is yes because I think that Q3 truly showed that even in an environment which was not in the pre-COVID and as it was normal, it really showed the appetite of consumers, both at-home where lots of things are now happening. But also in whatever was recovered in the out-of-home, it was visible that consumers are keen to live life and to do that with high-quality products and proven brands. And when you combine that with our prioritized initiatives and actions that we were doing, I believe, quite well in Q3, that really leaves us with a strong confidence that as and when the situation starts to recover, that we are in situation to really leverage that quite well.
The second one is for Michalis. I appreciate that on the one hand, you've got tough comps in Q4. And there are -- there is rising case growth and increased restrictions. But I think you're also alluding to stronger cost control and slightly favorable COGS, on the other hand. I'd appreciate any comments you might have on 2020 sales and EBIT irrelative to your expectations?
Yes. Ed, I think that indeed, especially if I look at the consensus, we see a very wide viability at the moment, which obviously is understandable in the circumstances. And given that we are now in mid-November and while, of course, uncertainties do remain, we believe that we have a strong sense of the likely scenarios for the business for the full year. And looking at the top line first, perhaps some of the more bullish analysts were more optimistic about the second wave than has been the reality that we are experiencing at the moment with some of the lockdown countries. In addition, as we have already said, we have a disproportionately adverse comparator on quarter 4 volumes, and Zoran alluded to that. So that's the reality also, as we said, about quarter 4. However, on the other side, I believe that there are 3 areas which potentially play to our favor on the cost side and overall, which drives better visibility in terms of EBIT and margins for the year. On one side, it's the price/mix recovery in the second half, which I believe that has a really strong impact on the leverage overall on the margins and COGS. I believe it captured well on the top line in the price/mix, but I don't know whether it's fully appreciated when it comes to the cost side. The second one would be the fact that we have benefited in the year from the falling PET prices, which have fully offset the adverse transactional effects, which was very early in the year hedged. So that has been increasingly helping us to protect the gross profit and margins and maybe could even give us a little bit more benefit until the end of the year as the transactional FX part is pretty much locked. And finally, as we announced today, we have had excellent progress on the run rate of our cost savings programs. So we are targeting an additional EUR 20 million in terms of savings. Obviously, given that this is new today, I wouldn't expect that it was captured in the profit numbers of the consensus. So putting all this together, we think that there is room for EBIT to move up, while rationalizing somewhat the quarter 4's top line in the consents.
Got it, very clear. And then third question, perhaps one for Zoran. Just on hard stocks within Europe. I think you've announced that you're going to be launching Topo Chico, I think in Austria, Ireland, Greece and Ukraine. Could you just provide your sort of high-level thoughts on what this brings to the party for Coke Hellenic in terms of occasions, in terms of channels? And has this started a sort of a broader push into the adjacent alcohol category as you've done into other categories such as coffee?
Thanks, Ed. Well, I think -- I don't know if I mentioned last time, we are really excited with this addition, and if you will, a new category, which I think is a clear demonstration of the Coca-Cola Company and us together with them, responding to evident consumer trends that are happening out there. And because of that, we are doing this together in the first 5 of the markets. But for sure, this is considered to be the first wave, and we plan to do more. Learnings from United States, where this category has completely exploded over the period of 3 years are very inspiring. And we have seen that kind of development as well in U.K. and in our case, in Ireland. So we also leverage the fact that for more than a decade, we have experience with premium spirits with knowledge and skills so people to sell that type of product. And we see it as an excellent addition to the portfolio for a wide space uncovered area at the moment because we are talking here about proposition, which is more refreshing and lighter alternative to the alcoholic beverages and also another proposition, which presents the competition to beer category from which hard seltzers are usually sourcing their volume and users. So fully excited with it. Very happy that we are starting. And the better we do a job in addressing this consumer need, I think that may inspire for possibly a broader thing down the road in terms of more countries, but maybe even more propositions.
The next question comes from the line of Sanjeet Aujla from Crédit Suisse.
A few questions from me as well. Firstly, based on what you saw in Q3 and with the news now about the vaccine, how quickly do you think the away-from-home channel can get back to normal? Do you expect permanent closures in outlets? What's your latest thinking on sort of footfall rebuild in that channel? Maybe if we start with that and I'll go to the other two.
Sanjeet, thank you. Look, we are very much encouraged as the whole world with the news. But we take it with a caution just from the point of view that we still wait and see when this is going to have really a mass impact. That truly all the whole population across all countries can be affected in a positive sense and that we can really start seeing the benefit from that. So I think that no one knows this yet, for sure, it's going to take a good number of months before something starts happening in a meaningful way. And that's why I have to say that it's really hard to predict that. We have been working and operating this year in a modus of a number of scenarios, but underlying thing was that we do the right things in how we strengthen the capabilities, how we really prioritize, reading what's now consumer trends, how shoppers have adjusted the way of shopping, what happens at home. So we are really focused on doing the right things in the business. And then as -- the benefit, if I can say of this year in terms of learnings is that in a very tough and hard quarter like Q2 or a much better Q3 quarter, we have been able to see how all the things that we are doing with initiatives, with abilities, with investments that we prioritize, how they work and that gives us a rich learning for next year. Just to say, because you asked about out-of-home, yes, for our business, it is an important segment. And even in the tough days, we stay next to our customers. We find ways of supporting them. Even those who are closed, we are next to them, finding ways how to support them. Sometimes it can be smaller things, bigger things doesn't matter. But our responsibility is that we stay close, and we partner with customers in rainy days and sunny days. And once these start recovering, I strongly believe that Hellenic will benefit from that because out-of-home, I see that as one of the competitive advantages of our business, in terms of coverage as well as what we do there.
Got it. Second one, just on established price/mix up 3.5%. That's one of the strongest performances we've seen there in a long time. I'd just like to get a feel how much of that is pure pricing? Are you actually getting headline pricing? Or is it just effectively lower promo spend? Just a bit more context around the pricing element of that, please?
Yes. Definitely, there is element also of pricing, but this strong performance, as you said, in the established segment is a result of several things. First of all, there is evident category mix. Then there is also a geographic mix that in these segment gives us the benefit which means that this is better performance of Switzerland as a high revenue per case country versus Greece. And then we did benefit from price/mix as well because we did have several price increases in a couple of countries, in Ireland, in Greece, in Italy, and in Switzerland. And we also benefited in Q3 from improved channel and package mix versus the previous quarters. However, even though it was still negative, however, it was in Q3, improved versus Q2.
Got it. That's all right. And my final question, just following the proposed European partners Amatil transaction. I guess, what are the implications for Hellenic's? And I guess, just a broader read across in terms of Coke bottling consolidation. Does this change anything for you?
Sanjeet, it doesn't. This doesn't have any direct implications on us. This transaction that is going to happen, touches the geographic territories that are not part of our considerations and have never been. We've been always very clear that we are very open to geographical expansion if and when Coca-Cola Company opens up or puts on the table, something that we do regard as a strategic fit. And we, both with firepower of the balance sheet as well as the strength of the organization, we are ready for that. But whenever that happens. So in short, no implications for Coca-Cola Hellenic. And that's all I could say.
The next question comes from the line of Ewan Mitchell from Barclays.
Three questions, if I may. Firstly, could you just flesh out about how you're thinking about how Q3 will move into Q4? I'm particularly thinking about how the strong momentum in the at-home channel could actually potentially accelerate in Q4 as more consumers are at home? And how this lockdown will be different to the last lockdown given we're ready for it? We -- attitudes have already changed quite significantly. Just a bit more flesh on the bones there would be helpful.
Ewan, thank you for the question. So as I said, first of all, coming out of Q3, first of all, where we really feel strongly about it and very encouraged, as I said in my earlier remarks. Q4 has a couple of elements to mention when we think how it could pan out eventually. First of all, when we talked 3 months ago, if I was asked, would I see that this level of restrictions and measures, lock downs would be happening again. Honestly, I would say no. I think that at that time, we started to hope that we are getting a little bit out of the woods. But thing has shown that in a number of markets, these imposed restriction and measures are necessary. And we do see where those strict measures are applied, they do have an impact on us. Also to note is that in Q4, we are cycling some quite strong numbers. As I said, we were around high single-digit cycling versus last year. So we are mindful of that as well. On the other side, yes, October, as I said in my remarks, was -- while it was 1.8% lower than last year, on a 2-year basis, it demonstrated continued, let's say, strong underlying performance of the business because in October, we were cycling high single-digit performance 2 years ago. In terms of the pool of countries, you see that some of the markets are really responding -- sorry, have a consequence because of the measures. Let me just mention that it's Austria, Italy, it's Czech, it's Hungary, it's Ireland, Romania, Adria, Bulgaria. On the other side, you do -- there are markets which continue to perform quite well, Russia and Poland, which we also highlighted in Q3. Greece also had a good performance in October, but that's before the lockdowns were implemented. Same comment for Switzerland. And in October, I need to highlight that Nigeria had a short-term disruption because of these protests and riots that were ongoing. However, I can say that Nigeria in Q3 has resumed to a quite strong performance that is the characteristic of Nigeria's performance in 2020. So I can't really estimate what is going to be the Q4 -- what will be the Q4. We are preparing for precious period. The fact that at-home continues to perform quite -- I mean, quite well in a positive territory. So Christmas will be relevant in any way with -- even in these times, and we are preparing for that with our customers. Another thing is that I would highlight that in the Q4, this is definitely a quarter more emphasized by multi-serves, less by single-serves. So in that mix element will be visible there, even though we are pushing more single-serves, but Q4 is characterized by multi-serves. Usually, it is 7 percentage points lower than summer. And even 5 percentage points lower than the average of the year. So I hope I provided you more color what impacts Q4. And we are reviewing our performance day-by-day, week-by-week. We -- I know the better we do on ground our job, I know that we will take the maximum out of it, whatever it proves to be by the end of the quarter and by the end of the year.
That's very helpful. Perhaps to kind of lead on from that, the shift in focus from the out-of-home channel earlier in the year to the at-home channel. You mentioned that you're now sort of focused on glass in the at-home channel. Could you just give us an idea on how, for example, single-serve glass bottle in the out-of-home channel versus a single -- a glass bottle in the at-home channel, how the EBIT impact on your P&L would be between consumers switching between those 2 channels, obviously, with very different logistics and sales costs behind them?
Thanks, Ewan. Michalis, I think you can provide a bit of color on that?
Yes. Ewan, look, as we have said before, certainly, if you compare the same pack between out-of-home and at-home channel, you will see much higher revenue per case in the out-of-home. You will see also, obviously, better margins, gross profit margins. However, as you move down towards net contribution and contribution margins because it's far more efficient to take products through the at-home channels than the out-of-home, the difference in profitability is not very big, certainly on a -- in percentage terms, maybe within a couple of percentage points. Now in absolute terms, euro terms per case, you would see higher absolute profit in the out-of-home. But as I said, it's not that great in terms of difference. So continue to work on premiumization aspects of the single-serve in the at-home with multipacks and with the more premium categories around adults and so on, is actually going to close the gap versus the out-of-home.
Very helpful. And finally, just to follow-up on the FX and commodity costs that you mentioned earlier, Michalis. You said that they should roughly offset each other perhaps even be a little bit beneficial. If I then factor in that the volume improvement for H1 versus H2 versus H1, how should we be thinking sort of gross margin in H2? It feels as though it could actually be ahead of H1 after the one-off benefit. Is that the right way of thinking about it? Or is there something that I'm missing there?
No. Look, for the second half, as you said, on one side, we will have quite a more significant accelerated impact, negative impact from FX because in the first half, especially the ruble was performing extremely well. We know it's a different world in the second half. Just to give you an idea out of the EUR 70 million load that we see in terms of negative FX impact this year, the first half was just EUR 15 million, and the rest is coming from the second half. So that's a drag. On the other side, we have the good news from input costs and particularly from PET. And again, with the oil price evolution, we got most of those benefits in -- starting from quarter 2 and well into the second half. So as I said, on a full year basis, the FX and input costs will be sort of canceling each other out, will be a worse, maybe even a small benefit because, as we said, we've locked the FX rates pretty much now whereas we continue to see benefits from input costs. And what is very important to your question about margins in the second half is, as I said earlier, the very strong recovery of the pack mix. I continue to emphasize that pack mix is maybe 70% to 80% of the recovery story. It plays a very important part on the leverage overall. And that's why I think that if you look at the full year, with all also the movements that are happening with some of the accounting that we talk about, the changes in the accounting and so on, we should see gross profit margin fairing very, very well compared to prior year.
The Next question comes from the line of Alicia Forry from Investec.
My first question is on agility, which you've spoken about quite a lot in your press release and remarks. Is there any reason to think that this improved agility within your business cannot be maintained once we have moved into the recovery phase and the crisis is behind us? Or is there something in there that cannot be extended once we move back to a more normal environment?
Alicia, well, in short, I absolutely expect that the agility element that was so critical and is critical for this year that it is going to stay with us in this, even more emphasized way in terms of how we reprioritize, how we flexibly adjust and adapt ourselves to the changing circumstances. How we are also reorganizing our resources, also directing our investments, all that has been done in a very fast, flexible way, both in terms of how we spend our operating expenses as we have clear learnings that what matters more, what matters less, and that has been part of our discretionary cost, a positive impact this year. And we will embed that also going forward. Also in our CapEx -- capital expenditure. Also, we are -- there are some areas that we have put on hold until next year. However, there are things where we continue investing more. And part of the -- our agile approach is also investing more in the online digital, how we are more -- to be more concrete, how to -- we are balancing physical route to market and digital route to market, how quickly we are doing that with our customers either through their own platforms or through our own platforms and applications. And let me just say, last thing is also agility is very much reflected how we are organizing and doing our work in -- within the organization where we are applying also agile principles of working behind prioritized initiatives, which are enabling us to crack targeted topics and areas in a much faster, condensed, intensive way, and immediately act upon them, as we have done this year for -- in a number of prioritized areas, which clearly we have read from this whole situation. So agility is one of critical growth behaviors that we have in our organization, and that is going to even more form the, what the culture of Coca-Cola Hellenic is.
My second question is coming back to the the price question that I think Sanjeet asked earlier. We're hearing about some promotional activity picking up in parts of Europe, but your comments seem to suggest it's really not affecting your footprint so much. Could you clarify a little bit more about what to the pricing environment is for your products in your footprint? And along with that, you talked about 40 basis points of value share gained year-to-date. Wondering if you could share the volume share over the period as well and just trying to see what -- whether there might be any differences in that?
Yes. Absolutely. So listen, first of all, pricing, we should let's see in the context of the competitive landscape and situation. And first of all, we don't see anything dramatically different. However, we do see that in a number of markets, competitors remain or continue to be quite aggressive, but in their usual way. That doesn't mean that we are not responding with our promo adjustments, which we absolutely do. So we should think about promotions in a way that one is that what type of things we are promoting, where we have put more emphasis on one side on single-serve multipacks, which we are promoting more for in-home consumption because of number of occasions there. But we also do not forget also multi-serves, especially the entry size packs for at-home consumption because in our revenue growth management, we are balancing both affordability, which is more emphasized this year as well as premiumization. Promo excellence in what we do is something that we pay a lot of attention to. Our teams are continuously doing promo analysis and those promos with the lowest returns on investment are discontinued or they are adjusted to direct investments into those things that are providing better returns. So I'm very personally pleased that, that's the essence of our own revenue growth management capability that we have done so far over the last 4 years, and we see fruition of that. So as I said, value share, to answer your question, value share is 40 basis points increase and volume share is quite similar to that, is a bit higher even -- it's a bit higher even than that.
That's very clear and helpful. My last question is on Nigeria, where growth is incredibly robust. What is the sort of realistic medium term growth rate that we should think about with regards to that market? I know it's been quite volatile in the past, but normalizing it out, do you have any thoughts on that?
Yes. Look, Nigeria is a country of a great potential. Given the fact of the size of the population, the average age and per capita consumption's, those are tremendous opportunities that this country offers. And then -- but with that being a classical emerging market that also carries sometimes risks like we have seen the one in October. However, I'm consistently reiterating our strong belief in Nigeria and potential of this market because of the reasons I just said. And that's why we are fully and strategically committed to invest in Nigeria, primarily in our talent over there, plus all necessary investments that we have been continuously doing. And even in the course of this year, we have been commissioning new lines to increase our capacity and also technical capability to do broader variety of products. So the fact that this year, Nigeria is continuously, with the exception of April and May and October because of their End Sars protest, Nigeria is a double-digit country. And I personally see, if there are no disruptions happening in the country, whether that's any political or macro reasons, I do see Nigeria as a double-digit growth country. And for that reason, we are always mindful of how we are expanding and evolving our capacity and capability in the country. Does that answer your question, Alicia?
Yes, absolutely.
The next question comes from the line of Charlie Higgs from Redburn.
My first one is on the Coca-Cola Company and our announcement of the rationalization of those business units are going from 17 business units to 9 and in particular, the new Africa unit and the European unit being led by Nikos Koumettis, I think he used to work with you. Should we be expecting significant changes to CCH as going forward and increased alignment with the Coca-Cola Company?
Sorry, can you repeat this very last part of the question, should we expect for Hellenic, what?
Are there any implications to your business from the shift by the Coca-Cola Company from 17 to 9 business units?
No, no. So first of all, I would say that we are very close with Coca-Cola Company in understanding, first of all, this strategic direction, and we are fully endorsing it from our end as well. I would also emphasize that, I'm very vocal about it, that our relationship with Coca-Cola Company and with the leadership across all areas, especially, I would say, this year has never been closer and stronger than it has been really in the sense of the true partnership. And this year has also proven how we work well together very close in a very aligned rhythm, if I may say. Now specifically, I think that the readjustment that Coca-Cola Company has done from 17 to 9, I think it's a very wise and smart move because it exactly brings the operating units closer to the profile of consumers as definitely, there are more similarities in the European continent than Africa. So having now operating unit that is fully focused on African consumer and African continent, I think, brings more attention and focus. And in terms of the appointed leadership, we are extremely pleased with their leadership. We know each other extremely well. And we really collaborate and partner, I would say, very effectively. And even though the structure is not yet officially live, however, we already work intensively with respective leadership and the teams in -- very closely in how we finish this year and how we are planning for the next year. So overall, in bottom line, I think absolutely the right direction. And I can only think that this will enable us to even further strengthen the way we work and effectiveness for our joint business.
And then my second question, just still on the Coca-Cola Company and their plan to cut the number of master brands in half. I appreciate you might not be able to say anything, but is there anything you can say at this stage as to where we should be thinking in terms of categories or price segments where these cuts may be coming?
Yes. So this cut, I think, was a strategically bold move because I think it was a really honest assessment of what will create value, what drives the growth versus what occupies lots of attention and work, but without the effect. So we are fully behind that. And already this year, together with Coca-Cola Company team, we have done work on our -- jointly, we have done the prioritization, and it doesn't mean that for certain brands, you have one size fits all. Because in a territory as broad and as different as we have in our coverage, it's not the same what Nigeria has and what Austria has or what Romania has and Switzerland has or what works. So that's why we have done prioritization of the brands in combination with the countries, and we have clearly highlighted what are those priority, as we call them combos. That then will be a matter of prioritization and resource allocation going forward. So in our case, it was not so many situations that brands get discontinued. It is more a number of SKUs that we are fully aligned to stop and discontinue either because simply, they are not getting the necessary traction with their share or they are below the threshold profitability. And that really gives us the chance to regroup, to resource and support more those parts of the portfolio as well as the new innovations like Costa Coffee, like Topo Chico and other things that will be coming in a more meaningful, broader, stronger scaling way.
The next question comes from the line of Simon Hales from Citi.
My first question was just sort of around sort of the cost mitigation actions that you've seen. I wonder if you could just talk a little bit about where the extra EUR 20 million of savings are coming from? And then in relation to that, I know in response to Alicia's question, you talked about hoping to retain certainly a proportion of those savings going forward. Would you hesitate, I guess on what proportion, perhaps of the savings you've seen going forward, do you think you might be able to held on to into 2021 and beyond?
Yes, Simon. So this extra EUR 20 million is the result of an excellent run rate that we've had on the year-to-date savings and what we project for the full year. Out of the total amount, roughly 80% is coming from DME, from marketing expenses, and 20% is all the other discretionary costs like travel, meetings, events, consulting, training and so on. So the -- for the incremental part, the EUR 20 million, I would say that it is split half-half between DME and all the other kinds of costs. So overall for the year, as I said, considering around 75%, 80% coming from DME and the rest from the other costs. Now going into 2021, I would expect that the biggest chunk of those DME cuts will come back in the cost base as we are going to support and fund the recovery of the top line and with a lot of important events also happening next year with the euro, with Olympics potentially and so on. When it comes to the rest of the savings, the other types of costs, some will obviously come back as hopefully, especially looking beyond quarter 2 and into H2. Some kind of maybe a resumption of activity around travels and meetings and so on will potentially come back. However, we do expect that a good part of this cost group is going -- is here to stay in terms of savings because of the new ways of working, more remote working, more virtual working, more digital meetings, more introduction of technology into our processes and the way we do things, a zero-based approach in terms of the consulting. So yes, some of that remaining cost savings are going to stay also in '21.
Got it. And then secondly, can I just ask about input costs looking forward into 2021. I think the memory back at the Q2 results, you were talking then about sort of base commodities, perhaps being up low to mid-single digits. I just sort of wonder where we think -- where you think we are now in that regard? And then maybe linked to that, also, I think, again, back at the Q2, Michalis, you were indicating that you thought it was certainly very possible we might hit an 11% EBIT margin at the end of next year. Where do you stand on that now? Are you -- has confidence increased on that given what you've seen in terms of recent trading and what you can see going forward around the cost base?
Yes. So in terms of input cost for next year, indeed, we are still looking at somewhere around the mid single-digit increase for next year. There is -- the OE price is having a good sort of run. So that we expect next year will influence the PET prices cycling an extremely good year this year. So yes, the mid-single-digit is -- for next year is the ballpark that we are looking at. Maybe an opportunity here to say that ForEx also for next year will be a bit higher than this year. And that is also on the back of primarily the ruble and the fact that this year, in 2020, we've had significant savings from our hedging policies at the beginning of the year, the favorable window that we have with the ruble rate. So the combined FX and input costs impact in 2021 will be significantly more adverse than 2020 because we had extremely good input costs this year. However, obviously, there is tremendous opportunity coming from the leverage as the top line recovers, both in terms of volume growth as well as in terms of the revenue per case. And primarily, I'm talking here, pack mix, as I said earlier, channel mix and a little bit of pricing, particularly in the emerging markets. So that should drive strong fundamentals in terms of continuing to improve margins year-over-year. Now to your question, the margin discussion gets a little bit complicated for next year because there is a number of things at play. So I would say that there is no reason why the organic margins, excluding all accounting and so on and so forth, will not reach our 2019 levels next year. It's just that on a reported basis, so incorporating the positive impact that we have from the [indiscernible] new accounting change and also the fact that next year, we are looking at the introduction of sugar and plastic taxes in Poland already from January 2021, and potentially Italy in the second half. This is not final yet. This, as we said in a previous call, will artificially inflate revenues and compress EBIT margin without really a significant impact on the absolute EBIT. So more or less similar EBIT, but with much higher revenue as we pass those taxes fully down to the consumer. So that also has a negative impact on EBIT margin. So on a reported basis, the -- we are going to have a lot of movements, plus and minus. But I think what is important is that on an organic level, so excluding all those kind of one-offs, margins can get back to the 2019 levels.
The next question comes from the line of Andrea Pistacchi from Bank of America.
I would like to ask you, please, first question about what you just mentioned, the taxes in Italy and Poland. So I think you just mentioned that Italy, which was supposed to be in January, has this been potentially delayed now? And then more broadly on the sugar taxes, we've -- I mean, if you could share your thoughts about this. In other countries, we've typically seen like Ireland, GB, very limited impact from the sugar taxes. Do you expect anything different in Italy and Poland given the way also that the taxes are structured? They are -- I understand well they are imposed on -- they'll be imposed on the majority of your portfolio rather than just on the sugar part, a, not giving the consumer much the option really to shift from sugar into the zero, the diet variant? That's the first question, please. If you could talk a bit about the sugar taxes
Yes. I'll start, and Michalis will jump in if also, anything else to add to provide you, Andrea with proper color. First of all, we know that Polish tax starts from January 1. And that, we know, has a significant impact in terms of the taxation because of how it is structured. It's one of the highest ones that has been introduced. However, we had already fairly similar experience in Ireland. Just to give you a sense. In Ireland, the average price increase because of the sugar tax situation was around 20%. In Poland, we are looking around 25%. And this means that it goes without saying that whatever the taxation is that is imposed in the business that we are passing it on through our prices to the market. And we've seen that, that usually becomes the conduct that the whole industry takes. So for any market, whether that's Poland from January 1 or Italy, which is not yet clear because the legislation or proposal stands from January 1, however, there are some conversations about moving it later in the year. Irrespective when it comes for both situations, we are fully ready with our plans, which includes then different level of price pack architecture, pack sizes, promotions that we are doing, so fully leveraging all the experiences that we have gone through in Hellenic, but also in the broader Coca-Cola system. And this gives me confidence that irrespective of what the situation is that we will go through it quite well. And this is just to remind that when this happens to the whole industry, because we are a more premium player, this has in relative terms, such increases, which are absolute ones, have a smaller impact for us than for those competitors who are today on a lower pricing. So then those kind of price increases have a bigger impact on them. So for next year, primarily Poland and then very likely Italy, just not yet 100% sure when exactly, are the 2 most concrete things. For the rest of the countries, we don't see anything imminent at the moment. But as I said, the capability that we have centrally and within each country makes us ready for any development that may come up. Michalis, anything from your end?
Yes. Zoran, just to build that we are obviously at the point where we are finalizing our plans, and we will come back by February when we announce our full year results with more details about the impact. But this -- especially the Polish tax is very, very significant. And if we assume the Polish tax coming into effect from 1st of January and of course, we will pass it fully to the consumer. And we assume also the Italian tax coming into effect from let's say, 1st of July provisionally right now, this will have, as I said, a huge impact on the revenue. You are looking at the revenue per case currency-neutral growth rate, potentially doubling simply because of the introduction of those 2 taxes. Between -- before tax and after tax, the growth rate of the revenue per case currency-neutral can potentially double. On the other side, as Zoran said, we have worked and continue to work to mitigate fully the impact from the reduced volume as a result of the increased pricing, and we are getting very close to that. So assuming pretty much no impact on EBIT net-net after the mitigation actions. If you look at the impact on the margin with such huge inflation of the revenue, potentially you may be looking at a 50 basis point difference in the margins before and after the tax. So you can understand that such movements at group level are very, very significant, and we will be coming with a lot more detail and guidance around the impact of the taxes, so that will help you with your modeling for next year.
That's great. Lots of color there. The second question, please, is on Costa, the rollout, which you progressed in this quarter. If you -- I mean, it's been early days, of course, but a few months since you started, what's really, say, exceeding your expectations? What's maybe not quite worked as expected? And have you started taking the brand into the HoReCa channel at all or the office channel? If so, how easy is it to get the brand into the accounts that you're already supplying with obviously, the other products that maybe already are doing -- have a coffee business with someone else? How easy is it to get into these accounts?
Thank you, Andrea. Listen, first of all, in short, we are very pleased with the progress of Costa, and either it is in line or, in many cases, above our expectations. Now let me start from the end of your question. How easily it goes, it correlates also with the fact, to which extent, Costa as a brand is known in the country or not. Because in Poland, where it's already such a strong brand. It's one level of awareness and affiliation with the brand versus countries where, I know, Romania, where it doesn't exist. However, we see that, first of all, and most importantly, consumer feedback and reaction is excellent based on sampling that we are doing because we really want to get consumers exposed to the product to taste and feel how high-quality coffee we are talking about. So that's most important. And then also customer acceptance and reordering, which has been exceeding our expectations. So I would say that our availability expansion, listing with customers, primarily in the at-home channel has been excellent. And because we have adjusted -- because of this year's COVID situation, we have adjusted our plans primarily to at-home. However, I can really say that in the last 2 months, we also already started penetration in the out-of-home channel in HoReCa channel, and this is overall, both in out-of-home and at-home. This is where the leverage of our route to market, leverage of our sales force, the fact that we have dedicated people who are brand ambassadors, who are selling the coffee, it makes a huge role because evidently, we are talking about people who know the category, who have the knowledge, who have the experience also based on the Barista's that we have employed in the countries to help us with that. So it is visible that this is helping us a lot. As a reminder for everyone on the call is that we are not talking in Costa only with ready-to-drink, but we are really talking about the full portfolio, which means whole beans, roast and ground coffee, coffee pods or capsules and also through vending or Costa Express machines, which providing really a Barista-Quality coffee, which is the unique proposition that Costa has. So in short, very, very pleased with the progress, very excited with the penetration with launches that we already have in our -- in 13 of our markets, and we continue with preparation for the launches also to further market in the coming months and quarters.
So there are no further questions in the queue. So I'll hand back over to your hosts.
Well, if that exhaust the questions for today, I would really like to thank everyone for the time today. While clearly, there are uncertainties and challenges to come, we do believe that the rapid improvement we saw in revenue trends in Q3, in addition to the consistently strong performance of market shares, demonstrates the underlying strength of our business. This strength, combined with the proactive approach we took to adapting to the new reality, means we are in excellent shape for the future and for capturing the growth opportunities in our industry. Let me extend my good wishes to you and your families and all of us at Coca-Cola HBC sincerely hope you stay safe and well. We look forward to speaking to you all again soon. Thank you.
Thank you for joining today's call. You may now disconnect your lines.