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Coca-Cola Europacific Partners PLC
Consumer Defensive | Beverages - Non-Alcoholic
⚡ Executive Summary
📊 THE BOTTOM LINE
Coca-Cola Europacific Partners (CCEP) is a high-quality consumer defensive business, serving as a critical bottling partner for The Coca-Cola Company across developed Europe, Australasia, and Southeast Asia. Its stable operations and extensive distribution network underpin a robust business model in essential beverages.
⚖️ RISK VS REWARD
At a current price of US$90.65, CCEP trades below the average analyst target of US$96.78, suggesting modest upside. However, the low target of US$73.04 indicates significant downside risk. The valuation appears mixed, with some analysts maintaining a bullish stance while others are bearish, leading to a balanced risk/reward profile for investors.
🚀 WHY CCEP COULD SOAR
- • Expansion into growing Southeast Asian markets could drive significant volume and revenue growth for the company.
- • Continued premiumization and diversification of its beverage portfolio, including energy drinks and new categories, can boost margins.
- • Ongoing operational efficiencies and supply chain optimization efforts are expected to further enhance profitability.
⚠️ WHAT COULD GO WRONG
- • Increased regulatory scrutiny on sugar content or single-use plastics could lead to higher costs and impact sales volumes.
- • Intensified competition from local and global beverage companies, coupled with evolving consumer preferences, may erode market share.
- • Adverse currency fluctuations and a slowdown in key European economies could negatively affect financial performance.
🏢 Company Overview
💰 How CCEP Makes Money
- • Coca-Cola Europacific Partners produces, distributes, and sells a wide range of non-alcoholic ready-to-drink beverages.
- • The company offers a diverse portfolio including soft drinks, waters, energy drinks, and juices under well-known brands like Coca-Cola, Fanta, Sprite, and Monster Energy.
- • CCEP operates as a key bottling partner within the Coca-Cola system, primarily serving developed markets across Europe, Australasia, and Southeast Asia.
Revenue Breakdown
Carbonated Soft Drinks
65%
Core Coca-Cola, Fanta, Sprite brands with strong brand recognition
Energy Drinks
15%
Monster Energy, BURN, Reign brands capturing growing segment
Waters & Juices
10%
AquaBona, smartwater, Minute Maid meeting health trends
Other Beverages
10%
Tea, coffee, mixers, isotonic drinks diversifying portfolio
🎯 WHY THIS MATTERS
CCEP's business model benefits from the resilient demand for its well-established beverage brands, providing stable and predictable revenue streams. The broad portfolio helps insulate the company from shifts in consumer preferences within specific categories.
⭐ Competitive Advantage: What Makes CCEP Special
1. Exclusive Bottling Rights
CCEP holds exclusive rights to manufacture, distribute, and sell products of The Coca-Cola Company in its operational territories. This provides an insurmountable barrier to entry for competitors attempting to sell Coca-Cola branded beverages, ensuring a strong market position and stable revenue base from globally recognized brands.
2. Extensive Distribution Network
The company possesses a vast and deeply entrenched distribution network across its key markets in Western Europe, Australasia, and Southeast Asia. This allows for unparalleled reach and efficient delivery of products to a wide array of retail outlets, making it incredibly difficult for competitors to match its market presence and logistical capabilities.
3. Economies of Scale
As the world's largest independent Coca-Cola bottler by revenue, CCEP benefits from significant economies of scale in procurement, production, and marketing. This allows the company to negotiate favorable terms with suppliers, optimize manufacturing costs, and run efficient marketing campaigns, translating into competitive pricing and superior profit margins.
🎯 WHY THIS MATTERS
These distinct competitive advantages ensure CCEP's long-term market leadership and profitability. The combination of strong brands, unparalleled distribution, and cost efficiencies creates a formidable moat that is difficult for rivals to breach, safeguarding its position in the beverage industry.
👔 Who's Running The Show
Damian Gammell
Chief Executive Officer
Damian Gammell is the CEO of Coca-Cola Europacific Partners. He has extensive experience in the beverage industry, having held leadership roles within the Coca-Cola system and other major consumer goods companies. His strategic focus includes driving growth and operational excellence across CCEP's diverse geographical footprint.
⚔️ What's The Competition
The non-alcoholic beverage market is characterized by intense competition from global giants, regional players, and emerging craft brands. Companies compete on brand strength, product innovation, pricing, and distribution reach. Evolving consumer preferences towards healthier options also drive competitive dynamics.
📊 Market Context
- Total Addressable Market - The global non-alcoholic beverage market is vast and growing, driven by population expansion, urbanization, and increasing consumer spending on refreshment and functional drinks.
- Key Trend - The most significant trend is the accelerating shift towards healthier, low-sugar, and sustainable beverage options, necessitating continuous product innovation and portfolio diversification.
Competitor
Description
vs CCEP
PepsiCo, Inc. (PEP)
A global food and beverage conglomerate, offering a wide range of snacks and beverages including Pepsi, Mountain Dew, and Gatorade.
Direct competitor in carbonated soft drinks, but also diversified into snacks. Leverages its own extensive distribution network and brand portfolio.
Keurig Dr Pepper Inc. (KDP)
A leading beverage company in North America, known for its Keurig brewing systems and brands like Dr Pepper, Canada Dry, and Green Mountain Coffee.
Primarily focused on the North American market. Competes with CCEP's Dr Pepper distribution in some European markets and other beverage categories.
Coca-Cola FEMSA, S.A.B. de C.V. (KOF)
The largest public bottler of Coca-Cola products in the world by volume, operating mainly in Latin America.
A fellow Coca-Cola bottler, not a direct competitor in CCEP's operating territories. However, it's a peer in terms of business model within the Coke system.
Market Share - European CSD Market
Coca-Cola (Bottled by CCEP)
38%
PepsiCo
25%
Other Brands
22%
Smaller Regional Players
15%
📊 Valuation & Analysis
📈 Wall Street Summary
Analyst Rating Distribution - 1 Strong Sell, 3 Hold, 7 Buy, 1 Strong Buy
1
3
7
1
12-Month Price Target Range
Low Target
US$73
-19%
Average Target
US$97
+7%
High Target
US$110
+22%
Current: US$90.65
🚀 The Bull Case - Upside to US$110
1. Southeast Asia Market Growth
Medium Probability
Penetration and expansion in the rapidly developing Southeast Asian markets could unlock significant new volume and revenue streams, potentially adding 5-8% to annual revenue growth over the next five years.
2. Premiumization and Portfolio Upsizing
High Probability
Successful strategies to shift consumers towards higher-margin products (e.g., premium energy drinks, craft beverages) and larger pack sizes could incrementally improve overall gross and operating margins by 50-100 basis points.
3. Digital Transformation & Efficiency
High Probability
Continued investment in digital tools for supply chain, sales, and marketing can lead to enhanced operational efficiencies, reducing costs by 1-2% of revenue and boosting profit growth.
🐻 The Bear Case - Downside to US$73
1. Increased Regulatory Pressure
Medium Probability
Stricter regulations on sugar, artificial sweeteners, or single-use plastics across key European markets could necessitate costly product reformulations or packaging changes, potentially reducing sales volumes and increasing operational expenses by 3-5% of COGS.
2. Economic Downturn in Key Markets
Medium Probability
A prolonged economic slowdown or recession in major European markets could lead to reduced consumer discretionary spending, causing a downturn in demand for certain beverage categories and impacting CCEP's overall revenue growth by 2-4%.
3. Supply Chain Disruptions and Input Cost Inflation
Medium Probability
Geopolitical events or natural disasters could disrupt global supply chains, leading to increased costs for raw materials (e.g., aluminum, sugar) and logistics, potentially compressing CCEP's gross profit margins by 1-2 percentage points if not fully offset by pricing actions.
🔮 Final thought: Is this a long term relationship?
Owning CCEP for a decade relies on the enduring strength of the Coca-Cola brand and CCEP's efficient bottling and distribution capabilities. The company is well-positioned in the consumer staples sector, offering defensive characteristics. However, adaptability to evolving consumer health trends and regulatory landscapes, alongside effective management of input costs and currency risks, will be crucial. Sustained innovation in its product portfolio and continued geographic expansion into growth markets are essential for long-term value creation.
📋 Appendix
Financial Performance
Metric
FY 2022
FY 2023
FY 2024
FY 2025 (Est)
FY 2026 (Est)
Income Statement
Revenue
US$17.32B
US$18.30B
US$20.44B
US$21.36B
US$22.32B
Gross Profit
US$6.22B
US$6.72B
US$7.21B
US$7.52B
US$7.86B
Operating Income
US$2.23B
US$2.44B
US$2.54B
US$2.82B
US$2.95B
Net Income
US$1.51B
US$1.67B
US$1.42B
US$1.63B
US$1.87B
EPS (Diluted)
3.29
3.63
3.08
3.54
4.07
Balance Sheet
Cash & Equivalents
US$1.39B
US$1.42B
US$1.56B
US$1.66B
US$1.70B
Total Assets
US$29.31B
US$29.25B
US$31.10B
US$31.79B
US$32.70B
Total Debt
US$11.91B
US$11.40B
US$11.33B
US$12.01B
US$12.37B
Shareholders' Equity
US$7.45B
US$7.98B
US$8.49B
US$8.03B
US$8.27B
Key Ratios
Gross Margin
35.9%
36.7%
35.3%
35.2%
35.2%
Operating Margin
12.9%
13.3%
12.4%
13.2%
13.2%
Return on Equity
20.25
20.93
16.70
17.93
18.00
Valuation Ratios
| Metric | Value | Description |
|---|---|---|
| P/E Ratio (TTM) | 23.30 | The trailing twelve-month Price-to-Earnings ratio indicates how much investors are willing to pay for each dollar of past earnings, reflecting current market sentiment towards the company's profitability. |
| Forward P/E | 19.92 | The Forward Price-to-Earnings ratio estimates future earnings multiples, providing insight into market expectations for the company's earnings growth over the next 12 months. |
| PEG Ratio | N/A | The Price/Earnings to Growth (PEG) ratio adjusts the P/E ratio for earnings growth, offering a more nuanced view of valuation for growth companies. A lower PEG is generally more favorable. |
| Price/Sales (TTM) | 1.95 | The trailing twelve-month Price-to-Sales ratio compares a company's stock price to its revenue, useful for valuing companies with volatile earnings or those in early growth stages. |
| Price/Book (MRQ) | 5.22 | The Price-to-Book ratio compares a company's market value to its book value, indicating how much investors are willing to pay for each dollar of its net assets. |
| EV/EBITDA | 15.50 | Enterprise Value to EBITDA measures a company's total value (market cap plus debt, minus cash) against its earnings before interest, taxes, depreciation, and amortization, often used for comparing capital-intensive companies. |
| Return on Equity (TTM) | 17.93 | Return on Equity (ROE) measures the profitability of a company in relation to the equity invested by shareholders, indicating how efficiently management is using shareholders' capital. |
| Operating Margin | 12.95 | Operating Margin indicates how much profit a company makes from its core operations for every dollar of sales, reflecting operational efficiency before taxes and interest. |
Peer Comparison
| Company | Market Cap (B) | P/E Ratio | P/B Ratio | Revenue Growth (%) | Operating Margin (%) |
|---|---|---|---|---|---|
| Coca-Cola Europacific Partners PLC (Target) | 40.80 | 23.30 | 5.22 | 4.5% | 12.9% |
| PepsiCo, Inc. | 245.00 | 22.50 | 11.50 | 6.0% | 14.5% |
| Keurig Dr Pepper Inc. | 45.00 | 20.00 | 4.00 | 4.0% | 19.0% |
| Coca-Cola FEMSA, S.A.B. de C.V. | 20.00 | 17.00 | 2.50 | 9.0% | 11.0% |
| Sector Average | — | 19.83 | 6.00 | 6.3% | 14.8% |