Good evening. This is Gomi, Head of Investor Relations at Coca-Cola Bottlers Japan Holdings.

Thank you for joining our first quarter 2026 earnings presentation for analysts and investors. Today, we are joined by President Calin Dragan and Vice President CFO Bjorn Ulgenes.

Also with us are Vice President, President of the Food Service Company and Chief Business Strategy Officer Maki Kado, Executive Officer and President of the Retail Company Alex Gonzalez, and Executive Officer, Chief Supply Chain Officer and Chief Sustainability Officer Andrew Ferrett. Following prepared remarks, we will be happy to take your questions.

Simultaneous interpretation in Japanese and English is available for both today's presentation and the Q&A. Before we begin, please note that today's presentation contains forward-looking statements and should be considered together with cautionary statements contained in our presentation materials.

With that, I'd like to turn the call over to Calin Dragan. Calin-san.

よろしくお願いいたします。

Good evening everyone. This is Calin Dragan, and thank you for joining our earnings call.

Today, I am honored to be able to open my prepared remarks by reminding everyone that next month, on May 8th, Coca-Cola brand celebrates the 140th anniversary. With that occasion, we want to wish Coca-Cola brand a warm, happy birthday.

We are really proud that we are able to bring such an iconic global brand to consumers in Japan, and we remain committed to further enhancing its value in the market. For the highlights of today's presentation, please turn to slide three.

We are off to a very strong start in 2026. Business income for the first quarter exceeded our target, growing by 3.8 billion yen versus the previous year.

Already, we have achieved more than one-third of the full-year business income target. This was primarily driven by a strong volume growth of 4% versus the previous year, gains in value share, and improved profitability from price revisions, resulting in a solid profit growth.

In vending, top-line trends are improving and showing positive momentum. Announced today, we will offer Japan's leading energy drink brand, Monster Energy, through our vending machines starting this peak summer season, positioning us to further accelerate growth in our vending business.

In the first quarter, we successfully executed key initiatives to improve profitability. Price revisions, one of our core profitability drivers, were implemented as planned for green tea products in March and are steadily delivering results.

Our transformation initiatives are also progressing smoothly, generating cost savings through strengthened operational foundations. Despite continued uncertainty in the current outlook, we have assessed the potential impact of the situation in the Middle East, and we are confident in our ability to manage any resulting cost increases this year.

By leveraging the strengths of the global Coca-Cola system, which is one of our core strengths, we expect to mitigate these pressures through our procurement efforts. In addition, by accelerating our profit growth momentum, pursuing further cost savings, and seriously considering further price revisions, we will take all necessary actions, which we are determined to achieve the full-year business income target of 35 billion yen.

Now our CFO Bjorn Ulgenes will provide a detailed explanation of our financial results.

Thank you, Calin, and good evening everyone. This is Bjorn.

Please turn to slide five for the first quarter profit and loss. In the first quarter, we achieved both revenue and profit growth that exceeded our targets.

Despite the impact of changes to the channel mix, revenue exceeded the target and achieved strong year-on-year growth of 3.6%, driven by higher-than-planned volume growth and improved wholesale revenue per case. Gross profit outpaced revenue growth and grew by 5.2%.

In addition to top-line growth, this was supported by commodity cost management, including joint procurement across the Coca-Cola system and solid hedging strategies, despite a challenging external environment marked by rising costs. In addition, as the first year of our strategic business plan, Vision 2030, we reviewed the useful life of our manufacturing machinery and equipment in line with our policy of making selective capital investments to improve capital efficiency and deploy capital effectively over the long term.

As a result, lower depreciation expenses totaling approximately half a billion yen contributed to profit growth. Business income increased by 3.8 billion year over year, primarily driven by top-line growth and cost savings achieved through transformation initiatives.

Factors contributing to this profit change will be explained later. Operating income increased by 9.8 billion yen year over year.

In addition to business income growing year over year, gains on the sale of tangible fixed assets, recorded as part of our efforts to optimize the balance sheet, contributed. Net income increased by 5.5 billion yen from the previous year, primarily reflecting higher operating income.

EBITDA, a measure of cash-generating profitability, increased by 0.6 billion yen year over year to 5.4 billion. Slide six shows our financial results by segment.

In the first quarter, a significant increase in the vending business profits drove overall profit growth. For the vending business, volume trends for existing machines improved and volume remained flat overall versus the previous year.

While revenue for the business declined year over year, specifically Coca-Cola vending machines increased revenues due to improved wholesale revenue per case. In addition, driven by transformation benefits improving routes, segment profit increased significantly by 4.6 billion yen year over year, returning the segment to profitability.

While this includes the benefit of lower depreciation expenses following the prior year's impairment loss in the vending business, we also achieved solid organic profit growth. In OTC, revenue outpaced volume and increased by 6.5% year over year, driven by robust top-line growth and price revision benefits.

Volume and revenue growth were driven primarily by online, drugstores, and discounters. Through a rigorous focus on profitability-driven initiatives, segment profit increased by 25.6% year over year.

In the food service business, we achieved high growth with double-digit increases in both volume and revenue compared to the previous year, driven by an expanded product portfolio, tailored to customer needs, and successful efforts to secure new customers. To sustain this momentum, we are steadily executing investments to support mid- to long-term growth and are driving business expansion in line with our plans.

Please turn to slide seven for the factors behind the change in business income. Business income grew strongly, increased by 3.8 billion yen compared to the previous year.

Starting from the left, we can see the impact of volume, price, and mix. Together, these factors reflect changes in marginal profits from our commercial activity and contributed a positive 2.6 billion yen year over year.

The main factors were a positive impact of 2.3 billion yen from volume, including channel mix, and a positive 3.8 billion yen impact from pricing, partially offset by a negative 3.5 billion yen impact from other factors. Although adverse channel mix due to changing consumer trends remained a headwind, volume growth and improved wholesale revenue per case resulting from price revisions are steadily contributing to profit growth.

Transformation benefits totaled 1.9 billion yen in line with plan. Savings were particularly significant in the commercial function, where benefits from the transformation of the vending business continued to materialize steadily.

In the supply chain and back office, we are building a foundation that contributes to mid- to long-term growth while also generating cost savings. Marketing expenses decreased by 2.2 billion yen year over year.

We continued to invest appropriately in marketing while carefully managing spending based on a return on investment philosophy and market conditions. Manufacturing costs increased by 0.1 billion yen year over year.

Although production volume rose in line with sales and manufacturing efficiency improved, changes in product mix, including a higher proportion of outsourced production, increased costs. We continued to pursue cost savings in the production floor and strengthening our production structure ahead of the peak demand season.

Other costs increased by 1.6 billion yen primarily due to higher IT-related investments and expenses to support future profit growth, as well as increased labor and outsourcing costs. This increase includes the benefits of lower depreciation expenses resulting from the impairment loss recorded in the vending business in the previous year.

Commodity and utility costs decreased by 0.8 billion yen, thanks to successful hedging strategies and our procurement function leveraging the Coca-Cola system's global network, one of our company's key strengths. Net cost improvements from commodities and foreign exchange amounted to 0.4 billion yen.

Utility costs also achieved a decrease of 0.4 billion. From the next slide, Alex will give an overview of our commercial activities.

Over to you, Alex. Alex Gonzalez (Executive Officer and President of the Retail Company, Coca-Cola Bottlers Japan Holdings):

Good evening, everyone. This is Alex.

Slide eight shows sales volume by channel and by category. Although price revisions negatively impacted demand, our effective commercial activities and contributions from core categories meant that Q1 sales volume grew 4% year over year, exceeding both the overall market and our plan.

Additionally, because of the series of price revisions, wholesale revenue per case continued to improve across most channels. First by channel.

In vending, volume trends improved and remained flat year over year, supported by a strong performance from core products and existing vending machines. In supermarkets, drugstores, and discounters, sales volume increased as we successfully expanded shelf space through campaigns tied to the FIFA World Cup.

In convenience stores, while price revisions impacted volume, wholesale revenue per case improved significantly, leading to improved profitability. In online, volume grew by 20%, driving overall growth despite a declining wholesale revenue per case due to a higher mix of large PET water.

In food service, volume grew by 12%, supported by an expanded product lineup, including customer-exclusive launches, and stronger sales of sparkling products in restaurants. By category, in sparkling, Coca-Cola and Coca-Cola Zero contributed to a 10% increase in volume.

In tea, products such as Yakan no Mugi-cha and Kochakaden contributed, while Ayataka continued to perform well. Although the March price revisions impacted green tea products, volume levels in Q1 were comparable to the previous years.

Sports, water, and coffee declined due to price revision impacts. Slide nine shows the status of market share and OTC retail prices.

This year, through profitability-focused commercial activities, we achieved balanced growth in both value and volume share. Our total channel value share increased by 1.1 percentage points.

Despite a challenging market, volume outperformed the market, and the year-over-year increase in volume share has contributed to value share growth. In vending, growth in volume share drove an increase in value share.

Growth initiatives in the vending business, including profit-focused assortment optimization using our AI-based assortment system, and targeted promotions through Coke ON, have delivered strong results. We successfully captured demand while improving wholesale revenue per case through price revisions.

In the OTC channel, despite the impact of lower volumes resulting from price revisions and channel mix changes, we have enhanced our competitiveness through expanded shelf space and targeted commercial activities, achieving balanced market share growth. In the first quarter, we effectively captured increased demand, improved value share by 0.3 percentage points year over year.

Our OTC retail prices have continued to maintain a price premium relative to industry averages. As a result of the series of price revisions, OTC retail prices for small PET products continue to exceed those of the previous year.

For large PET, although affected by channel and packaging mix shifts, we have maintained the elevated price level. In March of this year, we implemented the green tea product price revision as planned, marking the ninth such revision since 2022, and we expect further improvement in trends during the second quarter.

Slide 10 highlights key topics for our quarter one commercial activities. We have successfully translated robust volume growth and improved profitability into solid profit growth.

Initiatives aimed at enhancing competitiveness have driven volume growth in the core categories driving overall volume, such as sparkling MT, marketing campaigns highlighting drinking occasions have proven effective. To expand shelf space, we are focused on maximizing unique Coca-Cola assets, such as the FIFA World Cup, and rolling out exclusive products for our customers, thereby accelerating efforts to improve competitiveness.

In vending, positive signs are emerging in volume trends. Road strategies such as further leveraging of Coke ON and revising product assortments with our assortment system are proving successful.

In particular, volume trends for existing machines have improved, and vending channel value share has increased. At restaurants, we promoted Perfect Serve to ensure consumers can enjoy Coca-Cola at its best, and aim to enhance the dining experience through proposals such as effectively utilizing bottled Coke and glassware.

Our efforts to improve profitability are making steady progress. We have implemented price revisions for green tea products as planned, effective for shipments starting March 1st.

At the same time, we focus on maximizing the impact of price revisions, and wholesale revenue per case continues to show an upward trend. In addition, we have proceeded as planned with the rationalization of rebates and promotional expenses, implementing marketing activities that are flexible and focused on ROI, in accordance with market conditions.

Furthermore, to improve our product mix, we have strengthened our efforts by rolling out products and packaging tailored to each customer's profitability. Our prioritization of profitability in commercial activities remains unchanged this year.

We are implementing optimal growth strategies for each business unit while rigorously enforcing detailed, data-driven performance management. On the next slide, Maki will go over our first quarter marketing activities.

Maki, please.

Good evening. This is Maki Kado.

On slide 12, I will review our marketing activities for the first quarter. In Q1, we achieved strong growth in revenue and value share through powerful campaign activations.

To strengthen our core category, in February, we launched limited-edition Coca-Cola FIFA World Cup bottles. We maximized in-store visibility by implementing effective campaigns that leveraged Coca-Cola's unique assets, including dedicated shelf displays.

These efforts proved successful, further accelerating Coca-Cola's growth trend from the previous year. Volume in the sparkling category, including Coca-Cola, increased by 10% year over year.

Additionally, for Georgia, we revamped our core products in parallel with the new campaign launched in March, aiming to enhance the brand's appeal. For Ayataka, we continued and strengthened last year's campaign that successfully highlighted its pairing with onigiri and worked to expand Ayataka drinking occasions.

In particular, since Ayataka underwent a price revision this March, we are thoroughly implementing in-store displays that emphasize its value. Regarding new products, Minute Maid Fruits Juice brand, in March, we launched Minute Maid Zero Sugar Peach Lemonade as an addition to the Minute Maid Zero Sugar Lemonade lineup, which has been well received and seen steady sales growth since its launch last month, March.

We will continue to strengthen sales efforts from the second quarter onward, aiming for further growth and expanded consumption occasions. In terms of experiential marketing, we have launched a campaign for users of the Coke ON app, which surpassed 70 million downloads cumulatively by the end of 2025.

The campaign will run throughout the year to celebrate the app's 10th anniversary, and the first wave has already begun. For the FIFA World Cup 26, we have organized a trophy tour and launched a promotion where consumers can enter codes found on the outer side of caps from purchased products via Coke ON to enter a draw for original merchandise based on the number of points earned.

By building excitement for the FIFA World Cup 26 even before the tournament begins, we aim to maximize exposure and sales of our products. Slide 13 highlights our marketing activities for the second quarter.

To strengthen core category, Coca-Cola is releasing the second installment of its limited-edition FIFA World Cup packaging for a limited time starting April 20th, featuring a selection of designs inspired by the uniforms and flags of popular participating nations. In April, Fanta relaunched its core flavors.

For the first time in a Coca-Cola Japan product, we utilized global AI technology to create a taste that goes beyond the boundaries of traditional fruits-flavored sparkling beverages. As for new products, we are launching Aquarius Zero from the Aquarius line this week.

With zero sugar and zero calories, it provides superior hydration compared to water. By introducing this innovation product, we aim to revitalize the sports drink market.

For Ayataka, we are launching four new products and revamping existing ones. In April, we launched Ayataka Koi Hojicha, a functional food designed to meet health needs.

In May, we will introduce Ayataka Mineral Green Tea, the first mineral-enriched green tea in the brand's history. By expanding our product lineup to address diversifying consumer needs, we aim to achieve further growth for the Ayataka brand.

For experiential marketing, in addition to launching the second phase of the Coca-Cola FIFA World Cup 26 promotion, we implemented initiatives leveraging bottled Coke and launched a certification program called Coca-Cola Foodmarks for restaurants where customers can enjoy delicious meals paired with the ultimate Coca-Cola experience. Through these efforts, we aim to enhance the experience of value so in today's signing.

Next, Calin will share our outlook. Calin-san, please.

Calin again. Slide 15 outlines our outlook.

To ensure we achieve our full-year business income target of 35 billion yen, we will carry forward the positive trends we have seen so far in implementing additional measures to maximize profit. As we enter the second quarter, all initiatives continue to progress smoothly.

In April, sales volume achieved robust growth of more than 2% year over year, while improving wholesale revenue per case. In addition, we are implementing further cost-saving measures to help offset anticipated cost increases.

Furthermore, while we are seriously considering further price revisions, we will ensure that we meet this year profit target and drive mid- to long-term profit growth by offering Monster Energy in our vending machines. With regards to the impact of the situation in the Middle East, assuming that conditions stabilize during the second quarter and that oil prices, exchange rates and other factors will improve towards the year end, we expect the additional cost increase for this year to be limited.

Our hedging strategy provides clear visibility in the near term, and we expect virtually no impact on first half earnings. For the full year, we anticipate additional cost increases of approximately 2 to 4 billion yen and, as discussed earlier, we plan to absorb these costs across the business by accelerating our positive earnings trend and implementing further measures.

Accordingly, there is no change to our full-year business income target. We will work closely with the global Coca-Cola system to leverage scale advantages for competitive procurement, helping us to maintain and to contain the cost increases and ensure a stable supply of material.

Given our strong underlying performance momentum and the resilient business foundation we have built, I am confident in our ability to achieve our targets. Slide 16 is about Monster Energy.

As mentioned earlier, starting from this summer, our peak demand season, we will begin offering Japan's number one energy drink brand, Monster Energy, through the industry's largest vending machine network. This is an exciting initiative that will bring about significant change for us.

This was made possible through the agreement between Coca-Cola Bottlers Japan, Monster Energy Japan and Asahi Beverage. By sourcing products from Asahi Beverage, we will leverage the strength of both parties, namely the leading energy drink brand Monster Energy and our industry-leading vending machine network, to create synergies and maximize value for our consumers.

We aim to expand consumer choice and purchasing opportunities for vending machines while further improving sales and profitability in the vending business. We plan to introduce product to Coca-Cola vending machines in our business area by this summer, which is the peak season, with the aim of driving immediate sales growth and improving profitability.

The product to be introduced, Monster Energy, comes in a 355 milliliter can with a manufacturer suggested retail price of 230 yen including tax. We anticipate that strengthening the energy category will significantly boost vending machine transactions.

Since this product will be in the highest price bracket within our vending machine product portfolio, we also have high expectations for improving wholesale revenue per case through product mix improvement. Under our Vision 2030 strategic business plan, we are striving to improve profitability and capital efficiency while aiming to achieve ambitious goals.

To realize this vision, we are exploring every opportunity for growth. In this context, we are very pleased that the introduction of Monster Energy has paved the way for us to strengthen the energy drink category, which holds significant growth potential for our company.

Also, as explained today, the vending business is aiming for an increase in segment profit of over 9 billion yen this year. We achieved a steady profit growth in the first quarter, and current sales volume trends are showing signs of improvement.

Now, offering Monster Energy will build on this positive momentum and further accelerate profit growth in the vending business. Furthermore, successful execution of these initiatives will further strengthen our path towards achieving Vision 2030.

Finally, here is today's summary. Please turn to slide 17.

As the first year of our strategic business plan Vision 2030, we delivered a strong first quarter performance. Business income exceeded our plan, and we have already achieved more than a third of our full-year profit growth target.

We achieved strong growth across all KPIs, including sales volume, value share, wholesale revenue per case and profit, and we are very pleased that this has led to improved competitiveness and profitability. As a result, business income surpassed our targets.

As we move into the second quarter and beyond, we will prepare thoroughly for the peak demand season. We will also build on our positive underlying momentum and steadily implement additional measures with strong discipline.

By doing so, we will mitigate the impact of the situation in the Middle East and deliver our full-year business income target of 35 billion yen. I would also like to reiterate that our short- and medium-term targets remain unchanged.

The measures discussed today, including the potential for further price revisions and the introduction of Monster Energy to our vending machines, are important initiatives that will support mid- to long-term profit growth. By further advancing these mid- to long-term initiatives and fundamental transformations, while continuing to strengthen our business foundation, we will accelerate our profit growth trajectory towards achieving Vision 2030.

That concludes today's presentation. Thank you for your attention, and now we will move on to the question and answer session.

Gomi-san, please take it from here.

Thank you, Calin. This Q&A session is intended for analysts and investors.

Members of the media are kindly asked to refrain from asking questions at this time, as a separate session will be held later today. Due to interpretation, please ask only one question at a time.

We will now begin the Q&A session. Operator, please proceed.

Thank you very much for your presentation. This is Ihara from UBS Securities.

Thank you for having me. Ihara-san, thank you for joining.

I have two questions. Firstly, it is not just about this year.

I would like to rather know what's your outlook for the next fiscal year, because this year you have offset measures to offset the cost inflation this year, but if this trend or the market situation continues, then what's your expectation for the cost push next year? Your target for next year's BI is 45 or 50.

Are you able to commit to that target, and what do you need to show your commitment to those targets for next fiscal year? Ihara-san, thank you very much for your question.

Basically he's asking your ideas about next year's business. Calin, please take this question.

For the question, and well, I decided to pick this question on purpose to try to reiterate on exactly what I mentioned in the prepared remarks. I said a couple of things, which I'm going to repeat.

2026, it's a tough year, but as you can see, we were able to overdeliver our first quarter, and basically in the smallest quarter of the year, we already have been able to deliver more than a third of our profit target. All the parameters of the year are going extremely well, as we mentioned, we are remaining confident for the year-end results, and I mentioned loud and clear that we are forward-looking to absorb the costs of the crisis in the Middle East from our own transformation efforts as well initiatives in the market.

Having said that, already that position in the very first year of our journey, the 35 billion, I would say it's a jump-start, for the lack of a better word, a jump-start on a fantastic journey towards 2030. With that in mind, I mention as well that we remain committed to our Vision 2030, including our targets communicated so far.

We believe and we based all this on the resilience that we have been able, in our opinion, to build in our business over the last years, going through a number of crises, as well fundamental transformation in our business. Nevertheless, through the crisis of Middle East that we are passing through, I just want to remind you that we are part of the worldwide consortium of Coca-Cola Company called TEPG, of Coca-Cola system, I'm sorry.

It's just fair to assume that we are able to acquire at best prices probably in the world, leveraging the power of the entire Coca-Cola system worldwide, as well availability of supply. Nevertheless, I would add, it's the fact that we are having our company hedging policy, which delivered very good results so far.

It's helping us at this moment in time, and it's only fair and normal to assume that going on, our hedging policy and pricing policy is going to deliver results as it delivers so far based on a clear track record. All this gives us confidence that we are going to be able to deliver the results, but primarily we are very proud of the current trend that we were able to build, especially in the vending business, basically growing from all key performance indicators.

Hope that answers your question. Thank you so much.

Thank you very much. Additional question.

When there was a Ukraine crisis, you utilized the power of our procurement system, but still you faced the push cost increase. If this trend continues into next year, what the size of the cost push you would expect for next year?

Thank you very much for your additional question, and Bjorn, please take this question.

Thank you, Ihara-san. As Calin tried to outlay already, we are very confident about our 2026 delivery, and we're also definitely maintaining our 2027 outlook, or even 2028 for that matter.

Speculating today what costs will come in 2027 is not very meaningful for us. I think instead focus on what Calin tried to convey.

We have probably the world's most powerful buying consortium for all the commodity baskets. We have a very good hedging policy that you can see the effect of in the Q1 results.

We are already taking proactive cost measures to manage the 2 to 4 billion that we included in the prepared remarks, and I think, from a qualitative standpoint, you should also think about the flexibility, the agility that we have built into our business over the journey coming out of vending. That ability to turn around, to manage the situation, because this is not the first crisis we're experiencing, gives us the comfort to believe in our targets and make sure that we will deliver them.

Hope that answers your question. Thank you.

分かりました。ありがとうございます。じゃあ、あの、二つ目の質問。Monster Energy。Up until now, I haven't seen many non-KO products in vending machine up until now, but now you receive supply from your competitors, which is quite rare in the market. What was the mindset change that you pursued this opportunity positively?

Do you think there are any other rooms to explore further collaboration with Asahi? Thank you, Ihara-san.

We have just announced the sales of Monster Energy in the vending machine. Calin-san, please take this question.

This is a strategy question, Ihara-san. Calin back here on the mic.

Thank you so much for the interest in our business. Very well known that Coca-Cola Company has a stake within Monster business and the collaboration worldwide.

There should not be a mega surprise that we are leveraging and trying to exploit exactly in the same way all our options that are available for us in order to grow our business. We believe that Monster Energy, it is a good brand, as you can see, it's a sizable market, and it's the leading brand in Japan.

We are opposing to this our significant and basically the largest in the world vending-retail business. We are convinced that through the combination of Monster Energy within our largest vending network, outstanding results are going to come out over time.

We are going to look forward to strengthening this partnership, and as well to use, as I mentioned in my prepared remarks, every possible opportunity for our business to grow and to build a solid base for our shareholders and their shareholders' gains. I hope that answers your question.

Thank you very much. Monster Energy and Coca-Cola Systems has a capital relation worldwide.

That's it and nothing more than that. Thank you very much.

Then operator, please put through the next question now.

SMBC Nikko Securities, Furuta speaking. I have one question.

The further price revision, you are going to consider seriously the further price revision. What is the timeline for that, and what the target scope of the further price revision?

Could you please tell us that? You did the price revision for the green tea category in March.

Will that be a target for the further price revisions? That kind of scope and further possibilities I would like to ask.

Furuta-san, thank you very much for your question. The consideration for the further price revision, Alex will take this question.

Alex Gonzalez (Executive Officer and President of the Retail Company, Coca-Cola Bottlers Japan Holdings):

Furuta-san, Alex here. As you rightly pointed out, we are executing the wave nine of price revisions with tea, and that's progressing pretty much as planned.

Now, with what has been shared in the prepared remarks, there is evidently a very fluid situation around Middle East, and as Calin and Bjorn have shared, we are looking at every single option to make sure that we deliver the business income target. In that regard, we are seeing that the pressure is on costs.

It's not only for CCBA, it's a cost pressure for the entire industry. We always, I think, have been walking the talk, seeing price increases as one of the levers to ensure that we are driving and protecting the margins of our business.

In that regard, we are seriously considering price revisions at this point in time. Nothing has been decided yet as it regards to the timing and scope, and we will come back in due course to share more details.

That's it for now.

Thank you. Under such circumstances, with the Middle East crisis, the cost increase will further increase the cost.

Under such circumstances, the price revision, you probably have to do the price revision at early timing. Also green tea categories, your competitors are not following up, and under that market conditions, do you think you are able to do the further price revision?

Furuta-san, thank you for additional question. This will also, Alex will answer this question.

Alex Gonzalez (Executive Officer and President of the Retail Company, Coca-Cola Bottlers Japan Holdings):

Furuta-san, at this point in time, we will continue to evaluate the situation, and we will come in due course when the time is right to share with you more details.

Thank you very much for your answer. Thank you.

Operator, please put through to the next question.

Morita from Nomura Securities. I have two questions.

First question is regarding the Monster Energy. Is it a contract with the CCGC?

Is it within the contract with the CCGC, or is it outside the contract with the CCGC? Thank you for the question regarding the Monster Energy.

Calin will answer.

Calin again. We need to clearly understand the question to be able to answer it precisely.

Inside or outside the framework of Coca-Cola Company. I just want to remind everyone we are working on a franchise or franchisee framework with the Coca-Cola Company, and of course within that framework there are, of course, certain rules of dos and don'ts.

Of course, this is something that is aligned within the framework of operating in Japan, as arrangements between the Coca-Cola Company and the bottlers regarding this category are happening around the world. In terms of Monster per se product supply, this is something that is happening between us, Monster, and as well Asahi.

Did we answer your question, Morita-san? Sorry, I didn't understand very clearly.

Basically, the marketing belongs to the CCGC. Will CCDC provide that marketing to the Monster, or is it included in the concentrate?

Coming into that. I'm sorry to slow down the answer, but we need to determine some basics and explain a couple of basics, which might not be well known.

Monster Company, it's a standalone company as well, publicly listed, a separate entity than Coca-Cola Company, where of course Coca-Cola Company holds an equity stake in it. That's a matter of ownership.

In terms of marketing and the means of distribution, Monster, it's operating like a separate company. Hence, from that perspective, the marketing relationship between us and the brand owner happens between Coca-Cola Bottlers Japan and Monster as a company.

Hope that answered the question.

Additional question is: the profit per case, with comparably other product, does Monster provide more profit per case?

Morita-san, I'm here, Calin speaking again. I'm sorry to drag me into these details, but I'm not going to disclose at this moment in time details like profit per case.

However, we try to be as explicit for you to be able to model, telling you that this is going to be in the range of 230 yen bracket as a price point, one of the highest that you can find within the vending machines in Japan. If you overlap that SKU at the highest price possible there over the highest number of vending machines in Japan, which is our Coca-Cola network, probably you can simulate the size of the benefits that can bring to our business.

I hope that answered the question.

My second question is regarding the possibility of additional cost increase because of Middle East. You said that it's 2 billion to 4 billion yen.

Could you explain the background of that calculation? Do you think that in the latter half of this year the situation will subside and improve?

Is it what you thought? Bjorn will answer that question.

Thank you, Morita-san. On the costs, as you heard in our prepared remarks, we estimate the net impact of this for 2026 to be in the range of 2 to 4 billion.

We're not going to give details on how we arrive at that. That's built on a set of assumptions that in the foreseeable future this is the impact, and it's within the range of what we will definitely manage.

Again remind yourself exactly what we also said to Ihara-san about the cost levels. We are buying at the best prices most likely globally through our global procurement system of all the commodities used in our beverages in Japan.

Secondly, we have a very strong hedging policy, as I also said to Ihara-san. You can see that from the impact of Q1, which helps us manage the highs and the lows of commodity basket fluctuations.

We're hedging currency, like I am assuming is normal. We have already, as we also said in the prepared remarks, we're taking additional measures already on the cost increases, and you heard Alex comment on the strongly considering pricing increases into the future.

We believe we are managing this within this year. We are fully committed to delivering the profit for this year and definitely for next year.

We will continue to update you as we go through the— Thank you.

Thank you very much. Thank you for your question.

Operator, please go to the next person with a question.

Thank you very much. This is Miyake from Morgan Stanley.

I would like to check on this current term that you just completed. First question is regarding the change in the useful year of your equipment, and then you have enjoyed the benefit of reducing the depreciation of about the tune of 500 million yen.

It's annualized maybe about 2 billion yen. Is this already factored in in your business plan?

Thank you, Miyake-san. Your question is about whether or not we are factoring in the benefits coming from the change of the useful year of the life for the machinery.

Bjorn, would you like to answer this question?

Yes, correct. We have re-evaluated the useful life of our manufacturing assets, again part of the overall focus on ROIC and sensible uses of our capital.

The impact will be 1.5 to 2 billion on a full-year basis. It was not included in the initial plan, but it's not material enough at this point to revision anything up or down on a full-year basis.

We put this into the mix and again remain strongly committed to deliver our 35 billion target for 2026. Thank you.

So

when you come up with the business plan at the beginning of the year, and you already have factored in this 1.5 to 2 billion in a full-year basis. You are not putting this on top.

Just to follow up, this is not included at the beginning of the year? Understood.

If that's the case, you mentioned that you can commit to that 35 billion target, right? Yes, right.

One more point. Against the first quarter plan, you have overperformed for the profit, right?

You have divided into these segments, and can you show me each contribution breakdown? For example, vending versus last year, 4.5 billion was the amount, and then because of the depreciation decline, there was about 2 billion in plus.

The revenue is not on top versus last year. What are the benefits coming from?

Is it the cost? For the OTC, I know you have better revenue than last year, but is there any cost increment behind that?

Sorry, vending, you are not factoring in the reduction in the depreciation, right? Anyway, by looking at the segment, what is the contribution factor for each segment that you can overperform versus the plan?

Thank you, Miyake-san. We would like to understand the background to why we could overperform the first quarter versus the plan.

Alex, would you like to answer this question? Alex Gonzalez (Executive Officer and President of the Retail Company, Coca-Cola Bottlers Japan Holdings):

I'll take that, Miyake-san. As we have started publishing the segment profitability, and we're very happy with that.

In your question, I think let me just go back a little bit again to August last year when we issued the Vision 2030 plan, because it contains some very key elements to how we run the business. You remember we talked about job tickets or job profiles by business unit.

Therefore, you can't just correlate immediately volume and revenue and profitability by segment. You have to look at the role of that business unit.

Let me quickly take them so we don't spend too much time on it. The whole purpose of vending is to drive profitability and capital improvement.

That's what you see happening in Q1 with a very, very strong improvement in costs and efficiency. That's the job ticket at the present moment for vending while we continue to maximize the revenue opportunities coming up in that channel or business unit.

OTC, yes, there are expenses related to running OTC, but most of that is related to our work with the customers and also therefore all the programs we're doing in supermarkets, in online, in convenience stores, etc. The role of food service business unit, albeit smaller than the two others, is to drive both top-line growth and profitable growth.

Again, the expenses there are more related to customer activation in the market. Hopefully that gives a little bit of texture to your question.

Thank you so much. Maybe we shouldn't look by the segments.

At the end of the day, in the first quarter, you could gain more profit than the plan because you have overperforming in the volume, and also you have more benefit coming from the transformation effects. Can I understand in that way?

Or is there any other additional cost reduction activities that we should be factoring in here? Alex Gonzalez (Executive Officer and President of the Retail Company, Coca-Cola Bottlers Japan Holdings):

Correct you a little bit. It might be the translation, but you said you should not be looking at the segment profits.

Remember, the segment profit is, again, to give insight into how we run the business. Going back to what I said, the three business units have very distinct and clear job tickets, the objectives they're supposed to deliver.

When it comes to transformations, a lot of the effort you see coming through in vending improved profitability is the function of transformations. We're optimizing the routes, we're optimizing resources, we're optimizing how we buy the product and the assets.

On top of that, remember, we're also driving a lot of revenue initiatives, again, pricing, but also the key elements of Alex we had talked about earlier on product assortment and how we optimize, again, placement and SKU profitability. There are always a lot of activities happening in a big business unit like vending.

You can't isolate, in most cases, one single cost effect to explain the whole profitability. My suggestion: look at the overall profitability, but also how the key drivers are manifested in the segment disclosures.

Then you will have a good picture of what is actually happening. So

when you look at the overall company base, I was just thinking, I believe that you have many transformation effects in every corner of your business, and particularly in the vending, it was very strong. That's what I understood.

Thank you very much. Thank you, Miyake-san.

Since we are approaching the designated hours, we would like to pick up a couple more questions. I hope that we can keep it one question per person.

Operator, please put through the next question.

I have one question about Monster Energy. I would like to just double check.

I would like to understand this will be a wholesale supply from Asahi to BJI, and you say that Asahi is a supplier of Monster Energy to CCBJI. CCBJI has no involvement in the manufacturing, meaning that financially it's only about margin, no production cost, because I would like to understand the nature of financial contribution of this business.

Thank you, Haji-san. You would like to understand whether BJI is involved in the manufacturing, and this is a pure wholesale business.

Alex-san, please take this question. Alex Gonzalez (Executive Officer and President of the Retail Company, Coca-Cola Bottlers Japan Holdings):

Haji-san, it's Alex here. Yes, just probably building on your confirmation, it's the agreement with Asahi.

We're buying product from them, and we're deploying into the largest network of vending machines. Yes, we're not involved in the manufacturing of this product.

I hope this clarifies your question.

Thank you very much. Then you will earn only the sales margin.

Is that only revenue from this business model? Yes, that is correct.

Thank you very much. Operator, please put through the next question.

Hello, good evening, Fujiwara from JP Morgan speaking. I have one question.

Just simply would like to ask about the figures. Page seven, slide seven, there's factors for increase, decrease, and I'd like to know the first volume price mix, and there is a breakdown numbers here, and volume.

Other than volume and unit price, and there's other, and that is minus 3.5 billion yen. That's what I heard, I believe, and that is pretty big.

I'd like to know the breakdown of that, and after the second quarter, what will happen to the others? What is the outlook for the other segment?

That's all from me. Fujiwara-san, thank you for your question.

The waterfall chart, the volume price mix, and there's other, and I would like to know the breakdown of other of the volume price mix. Bjorn will take this question.

Yes, inside the other, that is a collection of several items. By selling more volume and therefore generating more revenue, which is good, we also incur additional sales costs, the moving costs, center fees, etc.

That will come as part of that because you're not always having sales that goes straight through overall. The commissions, which is also part of the vending business inside here, decreased a little bit in the quarter.

We also have what we call the variable transportation costs or logistics costs also rose again, because we're moving more product in the quarter. All of those mixed elements will come in that category.

Thank you. Then

that means the variable promotion costs, the rebate, or the kind of impact is coming from those impacted by that, and the negative amount is big for others is something that is not negative. Is that correct understanding?

Absolutely, 100%. It's the cost of doing business.

Yes, understood. Thank you.

Fujiwara-san, thank you for your question. Operator, please put through to the next question.

Thank you very much. Igarashi from Daiwa Securities speaking.

Quickly, I have one question regarding the volume. Sustainability of the successful volume growth.

Plus 4% is very good. In April, it's plus 2% in the flash report.

Is it slowing down, or in the first quarter, it was too good. Could you give us a comment regarding the growth in the volume?

Thank you for the question regarding the sustainability or the growth of the volume, and also how to assess the 2% growth in April. Alex will answer.

Alex Gonzalez (Executive Officer and President of the Retail Company, Coca-Cola Bottlers Japan Holdings):

Thank you. Alex here.

The preliminary report in April is plus 2% flash. Far, we believe we continue to outperform the market, which is a positive thing.

What we're seeing in the volume impact is, as you recall, we took the price increase of green tea. That's negatively impacting the trend in the early part of the month.

Nevertheless, I think what I want to call out is the fact that we believe to be outperforming the market, and we feel confident about the outlook that we have to deliver the 35 billion profit for the full year.

Understood. Thank you very much.

Thank you for your question. Operator, could you move on to the next question?

Hi, this is Sumoge speaking from BofA. I hope I'm audible.

Yes, please go ahead. Thank you.

I know this has been repeating questions. I would like to ask about the 2 to 4 billion yen cost push.

In slide 11, you mentioned about those plans, and then you mentioned that in the first half you don't really have much impact, but then can I understand that you are expecting some kind of impact in the second half? Also you mentioned about 2 to 4 billion is a potential one.

They may not happen. Then, as if we see the price of the oil stabilize after April, is that the kind of scenario that you assume in here?

Thank you, Sumoge-san. Your question is about the cost pressure for this year.

I would like to ask Bjorn to pick up this question.

Thank you, Sumoge-san. Again, we reiterated our belief that the net impact will be about 2 to 4 billion in our commodity and currency basket for this year.

Again, speculating about the future is not very helpful here. We are again committed to deliver 35 billion, and we will manage towards that.

I think instead, I would remind you of what happened back in 2022 when the Ukraine crisis hit, again, the commodity and the currency markets. You saw what we did, and we managed that through probably one of the bigger impacts to the beverage business ever in Japan.

You heard also the determination of Alex saying we are seriously considering price increases, which is exactly what happened when that Ukraine crisis started flowing through into the commodity markets. Rest assured, we are on that, and we will manage towards our targets.

Thank you.

Understood. Thank you.

What about the timeline? Because in your presentation on page 15, first half you are not expecting any impact, but then you are saying about maybe second half you might be having an impact.

What do you think about the timeline? Thank you for your question.

The first half and the second half assumption, I would like Bjorn to answer this question.

Again, Sumoge-san, we're operating with different scenarios that we're managing, again, with the purpose of delivering our profit. We estimate, as we also said in the prepared remarks, that in the foreseeable future the effects of this event will start subsiding, and that's what we're managing against.

I'll leave it at that. Thank you.

Thank you very much. Thank you for your question.

Since we are running over time, I would like to pick the final question. Operator, please go ahead.

This is Miyazaki from Goldman Sachs. Thank you very much for having me.

I would also like to ask a question related to Middle East situation. You've already explained the cost impact, it's clear to me.

How about the procurement risk? Is it correct to understand that you have almost no risk in the procurement aspect, such as PET bottle or packages?

How about the physical procurement risk? I'd like to understand how you see it.

Thank you very much for your question about the impact of Middle East situation, the risk of procurement. Calin-san will take this question.

Calin-san, Calin here. I'm jumping again in to take this last question and to try to answer your question, but as well to make a comment about this continuous concern and questions directed to us as a company about the political situation in the Middle East as well.

I can answer very simply the first part of the question. Right now we are not facing any shortage of product.

Second thing that I can say, in the foreseeable future, we don't foresee having any shortage of product. We can estimate some cost increases that we have measured because of the overall dynamic of the pricing, because of the demand and supply situation.

We are confident that through our network we are able to supply, at least to what we have visibility, the supply for our raw materials. I hope that clarifies the overall situation.

Now let me go back to the Middle East situation, which concerns everybody. With all due respect to the audience, asking us about scenarios of product shortage and product pricing for 2027, it's at least unrealistic.

Meaning we are not geopolitical experts, and we are not having a call here to debate political trends. Meaning what's going to happen in 2027, I can tell you right now I don't know, and nobody in our company knows what the impact would be if this crisis is going to stay here for another 40, I don't know, 24 months or 48 months.

Nobody can estimate it. We are doing our best estimations for what's in our control, as well leveraging our power of purchasing in any conditions out there.

We need to make sure that no matter the condition out there, we are buying at the best price in the market. No matter the conditions out there, we need to make sure that we ensure supply.

As well, we need to make sure that we are as well best in industry in ensuring supply. This is the only thing that I can tell you right now, and the fact that we have created a very solid business in Japan over the years through our transformation, the fact that we are purchasing through the consortium, which is one of the biggest in the world, and third, we are having a very healthy hedging policy, which proved to work over the last years, gives us confidence to believe that no matter the scenarios are, we will manage above average within the industry in Japan and outside Japan in the world within the Coca-Cola system.

More than that, going and giving granularity now for quarter four impact of costs in 2027, I think that's totally unrealistic to be questioned at this moment in time, and this is what I want to highlight. At this moment in time, we stay committed to the results of this year through fantastic trends out there in the market for our company, and with all due respect, the way how I would suggest you read the numbers is that we have overdelivered in all the KPIs in quarter one, not only profitability.

More than that, we stay committed for the year-end profit, as well for step by step 2027, 2028, and 2030 Vision 2030 results. Now I hope that concludes the answers today and as well try to set the scene for how we are looking at the crisis in the Middle East.

Thank you very much for your questions and your interest in the business. ありがとうございます。

Thank you very much for your comments. Thank you very much for your questions.

With that, we would like to conclude the Q&A session, and we are running over time, and thank you for your patience. Then we will put the information in the presentation on our website.

If you have other questions, then please contact the IR team in our company. Thank you very much for your participation.