Coca-Cola Bottlers Japan Holdings Inc. Q4 FY2025 earnings call

2025 was a fantastic year with business income exceeding forecast reaching JPY 24.5 billion, more than doubled than the previous year. Adjusted business income excluding cumulative external factors since 2017 exceeded JPY 50 billion. In August, revised strategic business plan upward and announced new Vision 2030 with ambitious targets. In October, expanded shareholder returns. In 2026, target business income JPY 35 billion, 4th consecutive year of earnings growth exceeding JPY 10 billion, enhance shareholder returns including 20% year-on-year increase in dividends. Focus on commercial excellence, further evolve business operation structure for each business unit, strengthen market execution through optimized product portfolio and marketing plans, focus on profitability driven commercial activities including price revisions, continue supply chain productivity gains through local production for local consumption model, advance data-driven management in back office and IT, strive for appropriate capital management and utilization to improve capital efficiency.

In 2025, the OTC and Food Service businesses supported revenue growth while the Vending business drove profit growth. In Vending, revenue declined due to lower sales volume from ongoing market contraction and the impact of price revision, but segment profit improved significantly by JPY 6.1 billion mainly due to transformation benefits including lower depreciation expenses associated with impairments and higher route productivity. In OTC, the market environment was challenging and volume declined due to price revision, however, growth in online and drugstores and discounters supported overall performance and full year volume remained in line with the previous year, revenue increased by 1.7% partially due to price revision. The Foodservice business achieved strong sales volume and revenue growth and earnings growth rate that was even higher, supported by expanded product offerings, activities to acquire new customers and price revision.

2026 business income target JPY 35 billion, increase of over JPY 10 billion from previous year. ROIC target 4% or higher. Increase annual dividend per share by 20% compared to previous year. Complete second year of JPY 30 billion share buyback program by October. Plan to achieve revenue JPY 902.7 billion in 2026, gross profit targeted to grow by 4.3%, EBITDA projected to reach JPY 70.1 billion.

Q: On Page 25, you were talking about like JPY 45 billion to JPY 50 billion for 2027, the return is also very strong in commitment in the tone. So I feel a confidence in the management here. But on the other hand, probably by looking through the length of the stock market, we were wondering the external environment is really harsh, but you have a very, very strong confidence. I feel that the communication is a little bit weak in here. So my question is when it comes to mid- to long-term plan, I know you are very confident, but what is the reason behind your confidence? I know there are something obvious to us, but there must be something that we are not yet realizing. I would like to understand where the confidence comes up from -- within your company?

A: Ihara-san, thank you for the question. So as you said, we are confident about the trajectory our business is on. And that's why we also thought it would be helpful for you to see a 2-year range so you can evaluate how we are progressing towards those strategic targets. And I think the root of your question, if I got the translation correct, is what's the source of the confidence? I think there are several things. One, we have a clear vision where we're going. We know our targets, we know our KPIs and the whole purpose is executing against that. Everything will stand and fall on commercial execution. And every day, we're seeing the 3-legged business unit approach we have or segments, as we also call them, continue to perform very well according to the job ticket they have been assigned. So that's the overall commercial part. And if we have time, maybe Alex and Maki can build on that. The second part is transformation. You saw very strong results for transformation in 2025, and we continue to build on that across the board, the Commercial business units, supply chain and back office. And three, you also see from the shareholder-related results that we're putting out there with the dividends, the share buybacks and the commitment to continue, so is the source of a very strong balance sheet. So overall, we believe these key fundamental elements will enable us to deliver our targets. Thank you.

Q: So the concept behind the guidance for this term. So volume mix effect will be much higher than last year. So there is an impact of the price revision in last October and also deterioration of channel mix. And also -- so not many manufacturers announced the price division. So considering everything, how are you going to deliver on the plan for this term for 2026.

A: Thank you, Furuta-san. So I think the essence of how we're going to deliver the plan is included in our waterfall. So let me try to put some context around it. One, we believe the Commercial profit will increase, which is a combination of what I said to Ihara-san's question around 3 business units executing their job ticket. And yes, as we also said, there are some challenges in the market with, for instance, Vending, not growing as fast as OTC and Food Service. But overall, we believe the combination of focused Commercial plans, price increases and a good management of our trade investments will deliver the commercial profit. When it comes to transformation, I think you would agree with me that we have delivered on our promise to change the business, and we will continue to do so across the board. This is not one specific business unit or function carrying the transformation. It comes from all the significant functions in the company, including IT. We're managing our investments, as you saw from the waterfall. Yes, there will be some increases in DME or marketing investments as we support the effect of the price increases and the channel mix. We are continuing the excellent track record in our manufacturing and our logistics to again, make sure we manage cost per case and in our investments. And we are offsetting a lot of the inflation we see coming through, especially on third-party outsourcing expenses and logistics in a good way to overall manage our performance. There is impact from a weaker yen that continues to hit the commodity basket. But overall, I think a very balanced way of achieving our 2026 guidance.

Q: For next year's guidance, thank you very much for the next year's guidance. And this year, the next 2026, except the depreciation is JPY 6 billion, JPY 7 billion, profit has increased. By 2027, in that sense, the depreciation -- because of the impairment, impact will be shorter or smaller and the performance amount, I believe the amount will be increased, that is the forecast, I think. But what I'd like to ask is that for 2027, comparing with 2026, the transformation initiatives or what will be the differences for the 2 years? So what is the driver for accelerating the growth? What is your thought?

A: Thank you, Saji-san. Excellent question. Let me try to give a little bit of context to it. One, on the commercial arena, as we have said earlier, our main focus is to execute the commercial strategies across the 3 business units with 3 different job tickets. And as you heard earlier, we are surgically focusing on leading on price and therefore, positive price mix that would be one of the elements. But secondly, also pick up the very important points that Alex had in his prepared remarks and also his answer to Ihara-san, data-driven profit growth. And as we keep on investing in Vending, but also an integrated finding, as you heard about earlier, and overall, in our tech-led transformation programs. All of this will start taking effect, we estimate, from 2027 onwards. So that will give us new insights that we either can't find today or will take a lot of time to develop. We will have them more at our fingertips. And that, again, will enable us to sell smarter and spend market. So the major changes are going to be primarily internally driven that we can control, but of course, also working, as I said earlier, striving for positive pricing. Hope that gives a little texture to your question. Thank you.

Q: I would like to hear more about the sales activities, especially Food Service. And I'm seeing that you are having a lot of outcomes and success in the Food Service. And looking at Page 16, it seems in terms of sales, volumes is going up. So you have a positive outcome in this area. And what I have heard so far, it seems that you have expanded lineup and you have new customers that you have achieved as well. But to be more specific, what kind of success are you really seeing in the sales activities? And when we think about the Food Service right now, so the mix out of your total business is still small. But probably, if you have a great success here, you'll be able to expand it to other businesses? Would that be possible? That is my question.

A: Well, thank you very much for the question. This is Kado-san from Food Service. I would like to mention 3 points. First of all, looking at the past 2 years or so, I would like to say, basically, the foundation part has changed. What I mean by that is, for example, in the past, Bjorn, Alex, they have explained this already, but let me repeat. So we are using more data. So it's data driven than the past, and we're getting all the insights from the data. So we're doing that. And also, our sales members have a stronger skill set. So the capabilities are really being stronger. So we have been really improving the base or the foundation of our business. And I think this is the foundation for success in the couple of past years. And the second point I want to mention is, again, I have mentioned this before, but we have customers that are winning at. So we want to have a closer collaboration, a very strong relationship with these customers, and that's working as well and that is another source of our growth. And talking about the future, so how should we proceed in this way. I think what we have to do is we need to make sure that we have more customers that we can win with, we would need to have sales activities based on strong proposals. That will be our ultimate goal. So that's my third point. We have already been doing it; OTC, Vending team, we have been collaborating already. We have been changing information. Of course, we are sharing our learnings to them, and vice versa, are the learnings from OTC and Vending. So they have a long history in their commercial activities. They have really achieved lots of success as well. So from those teams, we are gaining lots of insight information as well. So it is like it is a vice versa, mutual relationship that's really working. And we want to continue to do that. Thank you very much.

Q: I would like to ask about the guidance. On Page 17 on your presentation, I would like to understand this. So in others, you said that you are factoring in the reduction of the depreciation from the Vending impairment. But I think other than that, we also have the cost elements here. So I would like to understand what are the other parts. And also, Kyoto has already put up some market investment because you have to secure the volumes since you have hiked the price. But I see your marketing expense is not going up that much. I believe that you are having very good control. So I know it's all in all a very positive trend. But is this feasible? My overlap to other questions, but我 would like to understand about the marketing expenses? And also, what are the costs that are increasing?

A: Sumoge-san, let me try to give a little picture to you. First, let's start with the others part. So yes, correct, negative JPY 3.5 billion, but that includes the close to JPY 5 billion of the positive impact of the depreciation, correct. So what is happening inside here, we are having inflation as most other companies in Japan, for instance, of logistics and outsourced expenses and overall inflation in general. That's one element, sort of the cost increase part. The second part, we are also investing, as you heard me said a couple of times today and also Alex talked about in Vending, we are investing ahead of the curve to again reset of how we work with data and using technology level transformations going forward. And you've also heard in our prepared remarks late last year and for this year, we went live with an integrated end-to-end planning system, which again, demands investments for us to be able to reap the benefits later back to my answer to Saji-san earlier about what the future benefits that we're going to see from all of this. So, net-net, we're seeing cost increases but also investments ahead of the curve in others. When it comes to DME, we are surgically focused, Sumoge-san, on having an ROI when we invest in the marketing activities together with the Coca-Cola company, as you know. So this will depend on the customer landscape. It will depend on the channel and also the competitive environment where we commit to managing these expenses just like we do with every other expense in our P&L. Hopefully, that added a little texture