Letter To Shareholder "We are now delivering against our most important objective - increasing value..."
team, we sharply exceeded our goals.
Throughout 2009, we achieved consistent, strong operating improvement, ultimately realizing comparable* earnings per diluted share (EPS) of $1.60, an increase of more than 20 percent from our results in 2008 and our company’s highest level of EPS ever. As a result, we are delivering on our most important objective – increasing value for our shareowners.
Although several factors contributed to the year’s outstanding results, the most important factor was an unyielding drive among our people to simply make our company better regardless of the barriers they may face.
This drive supported successful field-level execution of essential marketing plans and made possible important gains in effectiveness and efficiency. As a result, we made substantial progress in realizing the full value of our brands in the marketplace even as we enhanced our operations and improved service to our customers.
This continuing drive to strengthen our company is vital as we work to achieve solid growth in 2010 and transform CCE into a company that delivers consistent, quality earnings growth and improves shareowner returns.
Our plans for 2010 call for profits in-line with our long-term growth targets; however, the operating environment remains challenging. In fact, throughout our territories we face persistently weak, rapidly changing economic conditions, evolving consumer preferences, and a highly demanding customer and retail environment.
Navigating these operating realities will require even greater efficiency and effectiveness, including continued success with our initiatives to minimize costs through Ownership Cost Management and building on our successful infrastructure optimization efforts. In addition, we must continue to develop our brand and product portfolio, and achieve ongoing success in marketplace actions that enable us to more fully capture the value of our brands.
Solid Gains In North America
In North America, for example, we must continue to strengthen our price/package architecture. In 2009, our efforts enabled us to meet expanding consumer needs for package options while pricing our products effectively and increasing North American margins throughout the year.In 2010, we will complete the rollout of the 2-liter contour package, execute a variety of can and PET configurations, including 7.5-ounce mini-sleek cans, and continue to strengthen our revenue management capabilities. This work is central to our ongoing effort to maintain or improve margins and position ourselves for long-term profit growth.
We will also strengthen our effectiveness through the continued evolution of our go-to-market model. In North America, our Selling and Merchandising Optimization program, or SMO, continues to have a positive impact on profitability, store by store, customer by customer. SMO lowers inventory, reduces out of stocks, and aligns sales and supply chain activities to meet customer goals.
Similarly, we are making excellent progress in integrating our supply chain through Coca-Cola Supply, which we created to maximize the total effectiveness of the Coca-Cola system. We also will continue to move forward with the implementation of Boost Zones, which offer targeted execution in high traffic areas and drive both sales and recruitment. In fact, we will more than double the 50 zones currently in place by the end of 2010.
Despite the pressures of changing consumer habits and economic challenges in the marketplace, we believe these and other initiatives will allow us to return to volume growth in North America over the long term.
Europe Sustains Balanced Growth
Our European operations continue to deliver an outstanding balance of profit and volume growth. Results for 2009 were excellent, representing the third consecutive year of strong, balanced growth and reflecting the vitality and attractiveness of this market.Going forward, we will build on this success through a combination of sparkling and still brand growth – closely mirroring our sources of growth in 2009. We will continue to focus on our core Red, Black, and Silver brands while strengthening our presence in energy, stills, and water. For example, we will expand distribution of Monster energy drinks and glacèau vitaminwater brands, and build on the success of Schweppes Abbey Well water in Great Britain.
Another key element of our ongoing success in Europe is our ability to serve our customers and, in turn, provide outstanding marketplace execution. In 2010, we will benefit from strong marketplace presence created by the World Cup. We also are beginning to see benefits from our involvement with the 2012 Olympics in London. There is a tremendous amount of interest in these games, and we look forward to capturing the full value of this marketing property with our employees, our customers, and consumers.
We also will continue to improve our customer service in Europe by targeting specific customer and consumer needs. This will enhance inventory management, reduce out of stocks, and drive better promotional productivity. In addition, Europe, which created the Boost Zone concept several years ago, will continue to add zones in 2010, with more than 70 additional zones planned.
Overall, we remain encouraged by the balance of Europe’s growth, even as we work to mitigate the challenge of economic headwinds. We are confident that we have the solid brand and operating plans necessary to capture the value from Europe’s marketplace opportunities.
CRS a Long-Term Key to Success
As we examine the areas of progress and challenge in our company, none is more important than our ability to succeed in our corporate responsibility and sustainability (CRS) efforts. We continue to link key CRS focus areas to our strategic business priorities and we are investing across our territories to embed CRS in every function of our business.In fact, we are holding ourselves to a clear standard of success. Our “Commitment 2020” outlines specific sustainability targets, including a 15 percent reduction in our carbon footprint, water neutrality, and recovering and recycling the equivalent of 100 percent of the packaging we place in the marketplace.
To move closer to these goals, we held our first ever CRS in Action Week in 2009, engaging every employee in every facility to ensure understanding of our goals and commitment to sustainability. Our long-term objective is clear – to build our commitment to CRS into our everyday business decisions so that we can always offer consumers the right product and package at the right place, at the right moment, and in the right way.
A Primary Goal: Increasing Shareowner Value
Looking ahead, we know that one thing is certain: reaching our long-term financial targets on a consistent basis is essential to driving improved shareowner value. We made significant progress in 2009, and ended the year with the strongest balance sheet in our history, with lower debt and strong free cash flow. Reflecting this success, we announced plans in 2009 to rebalance the use of our free cash flow toward increasing returns to shareowners. We also have announced plans to repurchase our shares for the first time in more than eight years. In addition, we expect to continue the type of consistent dividend increases that have allowed us to double our dividend per share since 2006.Continuing to work closely with The Coca-Cola Company in our approach to the market, our operations, and customer service is also critical to driving shareowner value. Increasing the synergy of our system – and fully realizing the benefits of our size and scope – are essential to our long-term success. We have made great progress, as demonstrated by the incidence pricing model that we and The Coca-Cola Company implemented for North America in 2009. We are pleased with the success of this model, and we have mutually agreed to continue an incidence model in 2010.
In fact, our future plans reflect a new dimension of cooperation. Going forward, this alignment is an important element of our work to create value for everyone with a stake in our company – our consumers, our customers, our employees, and most importantly, our shareowners.
Through the talent and drive of our employees, the innovative strategies that are refreshing our company, and the unmatched value of our brands, we are well positioned to meet the demands of a changing industry and deliver the type of consistent results of which this company is capable.
Financial Highlights Coca-Cola Enterprises Inc. "
