As a result of the strategic review, CCA is implementing a number of strategies to in an attempt to return the company to growth in Australasia and Indonesia.
The strategies which have been developed are:
- A joint campaign between The Coca-Cola Company and CCA in Australia and New Zealand with #colouryoursummer, which kick starts a continuous cycle of up-weighted marketing investment aimed at “bringing back the magic” of Coca-Cola;
- Launching of Coke Life in Australia and New Zealand in April 2015;
- A next-generation digital technology platform aimed at significantly enhancing the route-to-market model and delivering a step change in customer service in Australia and New Zealand; and
- The Coca-Cola Company will be investing US$500 million to accelerate Coca-Cola Amatil Indonesia’s (CCAI, a subsidiary of Coca-Cola Amatil) growth strategy in return for ordinary equity ownership interest of 29.4 percent. Capex will be up-weighted to ~A$150m pa for the next 3-4 years to fund infrastructure expansion to enable the business to broaden its product offering, develop new consumption occasions and offer a greater range of affordable packages. Under the agreement, CCA will retain management and operational control of CCAI.
The plans have been developed to reflect three broad group strategic themes: strengthening CCA’s category leadership position in each of our markets; making a step change in our productivity and in-market execution; and build better alignment with The Coca-Cola Company.
CCA’s Group Managing Director, Alison Watkins said, “The strategic review process has been comprehensive, structured and well-resourced and has confirmed our significant strengths and clarified our competitive advantages.”
“In parallel we’ve made changes to our organisational structure, leadership and to our partnership with The Coca-Cola Company. We now have a flatter organisation structure and more accountable Group Leadership Team. Each business has recent new leadership with sound experience and strong values. We have refreshed our vision and values within the organisation to provide a clear sense of direction and purpose to our employee base.”
CCA is targeting to return to mid single-digit growth in earnings per share over the next few years with no further decline expected after 2014.
Watkins said, “We are confident that the combination of revenue and cost initiatives we have underway will restore the business to growth. The pace of recovery will however depend on the success of revenue initiatives in Australia and Indonesian economic factors.
“With free cash flow generation expected to remain strong, the business is well-placed to target a dividend payout ratio of over 80% over the next three years. We expect to maintain a conservative balance sheet position which provides us with flexibility to fund future growth opportunities.”
Capex is expected to be around $310 million pa for the next three years, below the level of Group depreciation. The core Australian and New Zealand business have been well capitalised with a base of high quality existing assets and excess production capacity as a result of high levels of capital investment over the last five years. Indonesian capex is expected to be around A$150 million pa for 3-4 years supported by The Coca-Cola Company’s US$500m capital injection. As previously announced, SPC will invest $100 million over next three years comprising a $78 million CCA investment and $22 million in funding from the Victorian government.
CCA will provide a trading update in early December.