Feb 9, 2012
Executives
Thor Erickson – Vice President of Investor Relations John F. Brock – Chairman and Chief Executive Officer William W.
Douglas III – Executive Vice President and Chief Financial Officer Hubert Patricot – Executive Vice President and President, European Group
Analysts
Ian Shackelton – Nomura William Smith – Deutsche Bank Lauren Torres – HSBC Kaumil Gajrawala – UBS Warburg Steve Powers – Sanford C. Bernstein & Co.
Caroline Levy – CLSA Judy Hong – Goldman Sachs Bryan D. Spillane – Bank of America/Merrill Lynch John Faucher – JPMorgan Alec Patterson – RCM Investments
Operator
Good day, and welcome to the Coca-Cola Enterprises Fourth Quarter 2011 Conference Call. At the request of Coca-Cola Enterprises, this conference is being recorded for instant replay purposes.
At this time, I’d like to turn the conference over to Mr. Thor Erickson, Vice President of Investor Relations.
Please go ahead, sir.
Thor Erickson
Thank you, and good morning, everybody. We appreciate you joining us this morning to discuss our fourth quarter and full-year 2011 results and our outlook for 2012.
Before we begin, I’d like to remind you of our cautionary statements. This call will contain forward-looking management comments and other statements reflecting our outlook for future periods.
These comments should be considered in conjunction with the cautionary language contained in this morning’s earnings release as well as the detailed cautionary statements found in our most recent annual report on Form 10-K and subsequent SEC filings. A copy of this information is available on our website at www.cokecce.com.
This morning’s prepared remarks will be made by John Brock, our CEO; and Bill Douglas, our CFO. Hubert Patricot, President of our European Group, is also with us on the call this morning.
Following the prepared remarks, we will open the call for your questions. In order to give as many people as possible the opportunity to ask questions, please limit yourself to one question, and we will take follow-up questions as time permits.
Now, I’ll turn the call over to John Brock.
John F. Brock
Thank you, Thor, and we welcome you to view as we discuss our results for the fourth quarter and full year 2011, as well as reviewing our outlook for 2012. For 2011, we achieved comparable earnings per diluted common share of $2.18 that was up 22% on a comparable basis.
Revenue grew 5.5% and operating income increased 9% both on a comparable and currency neutral basis. These results are driven by solid volume growth of 3.5%.
These are excellent results over our prior year pro forma performance and are in line with or exceed our long-term growth targets. Importantly, these results are another step toward a most important objective, growing value for our shareholders.
2011 also marked our first full year of operation as an exclusively Western European bottler. And we believe these results demonstrate both the value of our operating strategies, as well as our ability to succeed in the Western European markets in which we operate.
This growth achieved amid ongoing global macroeconomic challenges marks the sixth consecutive year of volume and profit growth in our legacy territories. And it reinforces our confidence in our long-term potential.
In fact, these are the types of results that we foresaw when we closed the transaction of the Coca-Cola Company to create this Company less than 18 months ago. Now, let's take a look at some of the key factors behind our earnings.
Importantly our core Coca-Cola trademark brands, where at the heart of these results growing approximately 3.5% and delivering more than half of our total volume growth for the year. And that was led by both regular Coca-Cola and Coca-Cola Zero.
In addition, we saw a solid 4% growth in sparkling flavors including an increase of more than 40% in energy driven by Monster as well as the introduction of POWERADE Energy in Great Britain. We also achieved 3% growth in stills led by Capri Sun and Ocean Spray and growth in water led by Soda Fountain and (inaudible).
By territory, volume growth was led by continental Europe, which was up 4.5% while Great Britain volume increased 2.5%. For the fourth quarter volume increased 3% driven primarily by the excellent growth from the continent of 6% and growth of 1% in Great Britain.
As previously forecasted, our full-year pricing per case was below the full-year increase in cost of goods sold per case. Bill will provide more color on this in a few moments, but let me emphasize we remain committed to expanding or maintaining margins over time, even though shifts in business conditions such as those we experienced in 2011 can create margin fluctuations.
Overall we’re pleased by these results. And we are confident that our 2012 business plans will build on this foundation creating value again for our customers and for our shareholders.
As we discussed with you in December, our full year 2012 outlook is inline with or above our long-term objectives despite the impact of a recently enacted tax increase in France. We expect earnings per share growth of about 10% driven by operating income growth in a mid single-digit range and continued execution of our planned share repurchase program.
We anticipate revenue growth in a high single-digit range. Each of these ranges are comparable and currency neutral and include the expected impact of the French tax.
We also expect free cash flow in a range of $500 million to $525 million with capital expenditures in the range of $400 million to $425 million. This guidance is build on solid operating and marketing plans that focus on maximizing the benefits of key significant initiatives, which include the London 2012 Olympics and the Euro 2012 Soccer Championship.
The London Olympics as a centerpiece of our marketing plans this year and represent a unique opportunity for our company and our people. In 2012, we’ll demonstrate our ability to successfully meet customer and consumer needs while maximizing the benefits of the Coca-Cola system support of the games for our share owners.
Our Olympic related activity actually began in 2010 with significant successful programs in place with our key customers. Our plans for 2012 include the Olympic torch relay which runs for 70 days and comes within one hour of 95% of the population in Great Britain.
Extensive in-store Olympic programs will be in place for the summer across all of our markets. We will also utilize our partnership with the 2012 European Soccer Championship or Euro 2012 throughout the territories.
The Olympic and Euro 2012 activities supplement our longstanding programs which include music promotions and Coke with Food. All of these programs create a solid platform from which to engage consumers and continued to build our relationships with our customers.
In fact customer service is at the heart of our ability to move this company forward. We have made excellent progress in this area as demonstrated by the fact that our customers now rate us as the number one fast moving consumer goods supplier in each of our legacy territories.
We will continue to enhance our customer relationships and our service in the year ahead ultimately creating sustainable growth and category value for our customers. Our commitment to service and to enhance the effectiveness and efficiency is reflected in a decision we announced today to step change our route-to-market and our packaging profile in Norway.
Norway despite having a relatively low population density currently uses a direct store delivery model and our Norwegian business also relies heavily on refillable packaging. By modifying our routes-to-market and converting to recyclable and non-refillable packaging, we will improve our customer service and drive value for customers, consumers and our share owners.
Additionally, moving to non-refillable bottles enables us to use innovative recyclable materials such as the PlantBottle in our operations. This allows us to provide additional packaging options to consumers and helps us to reduce our carbon footprint in our production and supply chain process fees.
This initiative is in its early stages and we look forward to sharing additional details with you in the near term. Bill will provide some incremental details on the financial impact in a few minute.
Going forward, our business plans for 2012 are centered on one ultimate goal, creating enhanced value for our share owners through consistent value building growth. Beyond our operating plans, we’ve demonstrated that commitment in two key ways.
First, we recently enacted a substantial 23% increase in our dividend, marking the fifth consecutive year of increases. This is also the second increase since the completion of the transaction and creating our new company some 18 months ago.
In addition, we’re moving forward with our share repurchase program. We completed an initial $1 billion program in the fourth quarter of 2011 and begin a new $1 billion program last month.
Our goal for 2012 is to repurchase at least $500 million worth of our shares. These are meaningful actions and we remain committed to increasing share owner returns for the long-term.
At the core of these strategies as well as our company, is a highly talented and dedicated team that is focused on success. At every level of our company in every territory, our people were committed to achieving increasingly high standards of performance.
Our results and our 2012 outlook are solid proof of their skill and dedication. We continue to see opportunities ahead for growth and value creation in each of our territories.
Despite the challenges of currencies and soft macroeconomic conditions we operate in stable territories with established consumer goods environments. We believe we have the right operating strategies in place to seize opportunities and to meet the demands of dynamic marketplace conditions.
In fact we believe the CCE Way, which is a combination of our operating philosophy and our marketplace approach will enable us to seize growth opportunities, enhance our operating strategies and deliver a seventh consecutive year of growth in 2012. Thank you for your continuing interest in our company and your participation today.
Now, I'll turn it over to Bill.
William W. Douglas III
Thanks John, and we appreciate each of you being with us today as we discuss our fourth quarter and full year 2011 results. We achieved solid earnings growth in 2011 with comparable full year earnings per diluted common share of $2.18, up 22% from pro forma 2010 results.
In addition, comparable operating income increased 17% to $1.1 billion and total revenue grew more than 11% to $8.3 billion. These results include a full year currency benefit of $0.15 on earnings per share.
This was the sixth consecutive year of growth for CCE in Europe. And our results were inline with or above our long-term growth targets.
We are encouraged by these results, which as John mentioned demonstrate what we believe is the growth potential of our business. Full year net pricing per case grew 2%, while cost of sales per case grew 3%.
As we discussed with you throughout the year, this reflects the impact of higher increases in cost of goods during the second and third quarters. As we expected the balance between pricing and cost returned in the fourth quarter with both pricing and cost of goods sold up 2.5% per case.
As John mentioned we remained committed to margin enhancement even though market and economic conditions may create occasional fluctuations. For the full year, operating expenses increased approximately 2% on a comparable and currency neutral basis, allowing us to increase our comparable operating income margin by more than 50 basis points.
Weighted average cost of debt was approximately 3% including debt issuances, capital leases, as well as the impact of currency swaps. And our overall effective tax rate for 2011 was 26.5%.
We also ended the year with strong free cash flow of $490 million with total capital expenditures of $376 million. While this is solid free cash flow, it was slightly below our [par] guidance and reflects the impact of a combination of factors.
These factors include a pension contribution in the fourth quarter, as well as a net negative change in working capital, as the year-over-year performance and accounts receivable improved while the performance of accounts payable declined. This also reflects a modest incremental investment and commodity inventories that we may do opportunistically benefit our commodities position for 2012.
Continued strong free cash flow coupled with a favorable balance sheet and our overall ongoing growth are the keys to our ability to create value to our share owners through share repurchase and increased dividends. As we’ve discussed, we completed a $1 billion program in 2011 and we have begun a new $1 billion program this past January.
We anticipate repurchases of at least $500 million in our shares during this calendar year. Now let’s turn to our outlook for 2012.
As you saw in our release we confirmed expectations for the year inline with previously disclosed guidance including 10% growth in earnings per diluted common share. Revenue is expected to grow in a high single-digit range with operating income growth in a mid single-digit range.
This guidance includes the impact of the recently enacted excise tax increase in France and is comparable and currency neutral. Although it is still early to predict the 2012 currency impact based on recent rates, currency translation would decrease full year earnings per share by approximately 6%.
Let me note that the outlook for 2012 includes the expected impact of our work to transform our route-to-market model and packaging in Norway. As you saw in our release this morning we will move from direct store delivery to third party and customer warehouse delivery and transition our packaging from a fillable to recyclable and non-refillable packaging.
These actions will improve our marketplace competitiveness and flexibility, enhance customer service and increase the value we provide to our customers. It will also strengthen our operational efficiency and ultimately lower our carbon footprint.
This initiative which we will complete over the next two years will require approximately $60 million in capital investments and result in $50 million in non-recurring restructuring charges. We will provide updates on this matter as appropriate in our discussions with you throughout the year.
Including this initiative, we now expect 2012 free cash flow in a range of $500 million to $525 million, with capital expenditures between $400 million and $425 million. Weighted average cost of debt is expected to be approximately 3% and the effective tax rate for 2012 will be in a range of 26% to 28%.
Now let me add a bit of clarity regarding the expected facing of our 2012 results, particularly with regard to currency and operating income. Looking first at currency translations at recent rates, we expect a negative impact during the first three quarters and a negligible impact in the fourth quarter.
As for currency mutual operating income, given the recently enacted French excise tax, prior year hurdles and the timing of planned market activity we expect modest growth in the first half of 2012 with accelerated growth in the back half of this year. In addition, you should note that there is one extra selling day in the fourth quarter of 2012 when compared to the fourth quarter of last year.
This will have a modest favorable impact on fourth quarter results, but a negligible overall impact on the full year. Given these and other factors we have discussed, we expect to achieve our 2012 guidance to the execution of solid operating plans with the phasing of the growth to be weighted toward the back half of the year.
So, in summary we are pleased with our success in 2011 and with the solid plans for growth that we have in place for this year. Of course, overall marketplace conditions remain difficult and then create issues as we move to the year.
However, we believe we have the right strategies in place to manage our business successfully, meet the challenging targets we've established for this year and achieve results at or above our long-term objectives. Thanks again for joining us.
And now, John, Hubert and I will be happy to open the line up for questions.
Operator
(Operator Instructions) The first question comes from the line of Ian Shackelton of Nomura.
Ian Shackelton – Nomura
Yes, good morning, gentlemen. I look to able to get a little bit more feel of how you’re going to react to the French tax coming in January?
And how you see the shape of the business strictly in France as we go forward through 2012?
John F. Brock
Hubert, can I ask you to comment on that one.
Hubert Patricot
Yes, the tax increase was activated to all customers on January 1, and accordingly we noticed that the January retail price progressively increased in France on most of our products and package. At the same time, we are just finalizing our discussion with our customer on a timeline, which is a usual one.
Though it's too early to understand the rolling impact fully of this tax, we would consider that historically low elasticity of our product will and should moderate the negative volume impact to anticipated growth somewhat. But as I said, the customer dialogue continues regarding our annual price increase, and we would see the full impact in the tax and the price increase probably in the end of the quarter, a bit too early to read that.
At the same time, we have a very strong marketing plan for France to, for most of our country and the reaction of our customer are being very, very positive.
Ian Shackelton – Nomura
Just to be clear, I think you’ve indicated before the tax problem and the price increases somewhere around 6% or 7%. It sounds like that’s price increase that went through on the 1st of January and then a more normal price increase will follow later in the year.
Is that right? Correct?
Hubert Patricot
Absolutely, absolutely, yeah, that's correct.
Ian Shackelton – Nomura
Okay. Thanks (Inaudible) for that.
Operator
Your next question comes from the line of Bill Smith of Deutsche Bank
William Smith – Deutsche Bank
Thanks. Can you talk a little about the gross margin tenure for the year?
So, my guess is that its lot worse in the first quarter, then it kind of gets sequentially better, is that a fair statement?
John F. Brock
Could I ask Bill to comment on gross margins for the year?
William W. Douglas III
Hi Bill, I think it would be a little bit granular talk about quarterly margin evolution. I think what I would say as we have plans in place and production actions that, excluding the French excise tax are intended to maintain our margins for the full year.
We're at a point now where we have pretty good line of sight on our commodity exposure and our current expectation for cost of goods sold for the full year would be in a range of 3.5% to 4%. And all in throughout our territories we would be looking at pricing that would be sufficient to maintain our gross margin structure.
We've taken pricing in some of our markets in the fourth quarter and in GB and France it's going in during the first quarter.
William Smith – Deutsche Bank
Okay, that's very helpful. And then just a follow-up on the question of the French tax and then maybe how some of the categories have changed from sort of your December 15 Update Call to now in terms of category growth rates.
But, more specifically on France first have you seen any customer boycotts yet? I know that’s pretty prevalent in that marketplace when you start to put a big price increase through?
William W. Douglas III
William Smith – Deutsche Bank
Okay, great. And then just on the change of the tenure or the category growth from December 15 till now?
Hubert Patricot
William Smith – Deutsche Bank
Great, thank you very much.
Operator
Your next question comes from the line of Lauren Torres of HSBC.
Lauren Torres – HSBC
Good morning. First, just a clarification, Bill, once again on the tax increase I guess last quarter you said that there will be this one-time step down in your margin including that tax.
So that is still what we should be expecting for this year, correct?
William W. Douglas III
Correct.
Lauren Torres – HSBC
Okay. And secondly, question on the Norway initiative, its interesting you’re talking about the charges associated with these changes.
I’m curious if you could just more broadly talk about the benefits, I don't know if there is any way to quantify what those benefits could be over the next couple of years? And then also, if these types of initiatives can be used in other markets whether it’d be from a distribution or packaging standpoint?
John F. Brock
Lauren, like a broad comment on Norway and Sweden, and then I ask Bill to give a little bit more granularity. I think it's important to frame what we're doing there with the realization but we are really pleased with what's happened in these two markets.
We bought them 18 months ago, and when you look at the kind of results that our teams there have achieved, they’re ahead of our expectations and that’s obviously very good. It's good for Sweden and Norway, and frankly I think it's indicative of what we would achieve in the future where we acquire something else.
And in terms of the Norway situation precisely we’ve studied it carefully and really have concluded that for a variety of reasons, we can really improve customer service. I mean this is a deal which is very, very strong and supported by the customers.
We can significantly improve our offering to consumers. We can reduce our carbon footprint, and frankly get the market much more (inaudible) in total.
So with that Bill, you wanted to comment little bit more on some of the financial aspects of it.
William W. Douglas III
Sure. Lauren, just to reemphasize what we’ve said in the release, and what I said in my remarks is we’re looking at a capital investment of about $60 million and that spread over 2012 and 2013, the bulk of that would obviously be in 2012.
The majority of that’s incremental capital, but to be fair some of that is capital that we would have spent to maintain the old systems. So it's not all incremental, but the majority of it, clearly is incremental.
And we said that we would be looking at approximately $50 million in non-recurring restructuring charges, very broad strokes, about half of that would be non-cash charges as we accelerate the depreciation of the, filling lines for employees. And then roughly the other half would be cash charges, executing the project.
Again the bulk of that would be incurred in 2012, but it would be spread over 2012 and ‘13. This project will be fully go live in the second quarter of the 2013, so the benefits will start accruing to us in the back half of 2013 and beyond.
I think if you look at it Norway is a very small country. Big picture, this is a relatively, it’s an important project for Norway but in the totality of the company it's a fairly small project.
It will have incremental investments, but I think at this juncture to model in significant increases in your overall model for the company, I think that would be unwarranted.
John F. Brock
Yeah, just one final comment Lauren, most of our business throughout Europe is in fact not direct store delivery, some 10% or 12% of it is, and it depends on the country, on the market, on the channel, on the customer mix, Belgium for a whole variety of reasons has a modestly higher percentage of direct store delivery than most of our other markets. Norway was one where we really saw as we got into it a major opportunity here, frankly to get it much more in sync with the rest of our markets from both a DST System, broadly eliminating it and also getting into much more strongly consumer preferred package, which of course is one way.
So, as Bill said, it’s not something that's particularly extrapolatable to other markets, most of them are already a lot closer to where we're going.
Hubert Patricot
But maybe last point is that different market, but we did about the same in the Netherlands in 2006, which was to move from refillable, returnable packaging into recycle packaging and it was very positive from a volume growth standpoint. So, we have (inaudible) in moving the market in this way.
Lauren Torres – HSBC
Okay, okay. And if I could also just lastly ask about Germany, any updates on interest and/or progression with talks on that?
John F. Brock
We in the Coca-Cola Company will provide an update on Germany when it’s appropriate to do so. Our timeframe continues as you know through May of next year and we will continue to look at Germany just like we would any other potential acquisition during a pretty detailed analysis and then talking about it when it’s appropriate.
Lauren Torres – HSBC
Okay, great. Thank you.
Operator
Your next question comes from the line of Kaumil Gajrawala of UBS.
Kaumil Gajrawala – UBS Warburg
Hi, first thing on your, on your revenue guidance, I believe your mid single-digit, mid-to-high single-digit in your December calls switch to high single-digit. Is that entirely pricing related to, pricing in France related to soda tax?
John F. Brock
Yes. Once everything settled down, it was, just clearly, it was in the high single-digit range as opposed to mid-to-high.
But it’s all the new ones of growing that forward into the final numbers, nothing organically is different.
Kaumil Gajrawala – UBS Warburg
Okay, got it. And I believe, I’m not sure about France specifically, but there was some price increases put in towards the end of last year.
Was France one of those markets or does the soda tax give you, is there an additional discussion that happens about the soda tax or is it, was France already as you’re, because you’re waiting for the outcome?
Hubert Patricot
We have pricing conversation right now in France and GB as mentioned. We had price increase in the (Inaudible) it’s mainly what you refer in the last quarter.
And the discussion will ramp up in the coming months for implementation in Sweden and Norway; in Q2 in Sweden, and Norway in Q3. I think pricing negotiations, as John said, are never easy but nothing really special to report but the juncture.
And I think the strength of our marketing plan is really something which is putting the keyhole in our discussion with the trade because they are really buying to it in the Olympics, in the Euro, so we are quite confident in the outcome of this negotiation.
Kaumil Gajrawala – UBS Warburg
Okay, got it. And then on the switch to third party basically in Norway, I understand that it’s early but is it something that’s big enough that we’ll see a meaningful step-up in return on capital?
William W. Douglas III
Given the size of the Norwegian market, it represents less than 5% of our total business. I don’t think it’s going to meaningfully move the needle for the total company, but it’s a positive factor in that direction.
John F. Brock
Well, and it’s also a project that’s got a very meaningful internal rate of return or we wouldn’t be doing it. So it’s just, as Bill said, fairly small in the big scheme of things.
But it’s a very attractive project financially.
Kaumil Gajrawala – UBS Warburg
Got it. And then last question on the dividend.
Are you happy with where your payout ratio is now or is there, did you have a goal of where you’d like to get it to?
William W. Douglas III
We spend a lot of time looking at that, listening to investors, benchmarking ourselves with others CPG companies, and again the share price moves around, but getting from a yield of approximately 2% to something closer to 2.5%, we thought would be appropriate place to be. I think we’re going to digest that.
We’re going to listen to investor’s reaction to our move, and we’ll adjust if it is appropriate going forward. But I think this is a resetting of our divined and you’d expect it to be increased appropriately on an annualized basis.
Kaumil Gajrawala – UBS Warburg
Got it. Thank you very much.
Operator
Your next question comes from the line of Steve Powers of Sanford Bernstein.
Steve Powers – Sanford C. Bernstein & Co.
Thank you very much. Bill just a quick question, a clarification on the free cash flow for this year and the slight reduction versus what your guidance was.
It sounded like at least one of the drivers was that offers just a commodity buy that you described. Is that, did I hear you right that now you’re expecting more like 3.5% to 4% inflation for fiscal ‘12 as opposed to I think 4% before and are those two things tied together?
William W. Douglas III
You are interpreting all the data points correctly; we did slightly tweak the outlook on total cost of goods from approximately 4% in December, to 3.5% to 4% now. We continue to be executing our procurement hedging strategy, and the move that we made in the fourth quarter was part of that.
So I would never index on how much of that impacted that revised cards, but it did assisted and was moving it in that positive direction.
Steve Powers – Sanford C. Bernstein & Co.
Okay, thanks. And then…
John F. Brock
We also have the final ‘11 numbers that we’re benchmarking against now too by the way.
Steve Powers – Sanford C. Bernstein & Co.
Right, right, okay. And then broader on free cash flow, free cash flow came in this year at about 70% of net income, next year it looks like you're guiding to a slight improvement and more like 80% if you, even if you back out the kind of the Norway one-time issues.
How should we think about your free cash flow generation relative to net-income over a broader time level? What's kind of your base target?
Is 80% acceptable or do you expect to get higher and if so when? Is that a 2013 event or is that further out?
William W. Douglas III
Well, again, similar to the dividends, I think we're looking at the performance of the new company. We're benchmarking it against other FMCG companies.
I think, obviously you've analyzed the data correctly. And we will be looking at initiatives to maintain and potentially slightly increase that conversion if you will of free cash flow to net-income.
Steve Powers – Sanford C. Bernstein & Co.
Okay and then…
William W. Douglas III
Working capital will be one of the areas that we would be taking another look at in 2012 and beyond.
Steve Powers – Sanford C. Bernstein & Co.
Okay, okay that makes sense. Lastly, the SG&A expense control was again very good this quarter.
I think actually, in dollar terms down year-over-year. Can you just talk about some of the initiatives you're undertaking to manage those costs?
How much of it is kind of sustainable overhead control versus maybe more things that kind of expenses that might come back.
William W. Douglas III
Well, I think if you look at the fourth quarter in isolation, we were comparing that with the fourth quarter of last year, obviously, which was our first full year, first quarter of existence that was probably a little bit of one-off there. But I think more systematically if you think about operating expense, that's something that we really as a leadership team try and instill a culture of what we call Ownership Cost Management, it’s looking in a zero based budgeting type of approach at everything, we are continuously benchmarking all of our areas whether it’s sales force efficiency, supply chain metrics, as well as back office metrics with other peer companies as well as broader industry and looking at where we think the opportunities are for us to get more efficient in our OpEx being going forward.
I think it’s a continuous improvement type mentality. We got a number of small initiatives in place for 2012, but nothing that I would highlight is a game change, but I think philosophically that’s the way we’re looking to do it, and you saw a little bit of that benefit in Q4 of ’011.
Unidentified Company Representative
And just to add that, that there are certainly no reason to think, it’s going to go backwards with the kind of intensity with which we tackle cost, I think you can assume a culture of continuous improvement in the whole cost management arena is which you’re going to be seeing here. We’re focused on it, dedicated to it, and so truly, I wouldn’t expect just to go backwards.
We’ve done a lot of benchmarking, we think we’re pretty good, but frankly we think we can always get better. And so, I think you’ll see it slightly, modestly improvement even as we go forward.
Steve Powers – Sanford C. Bernstein & Co.
Thank you very much.
Operator
Your next question comes from the line of Caroline Levy of CLSA.
Caroline Levy – CLSA
Good morning, everybody. Couple of questions, could you discuss what you think the impact might be of currency on revenue, I don’t think, I [pick that up].
John F. Brock
I think Caroline, directionally a similar amount, if you look at our P&L given the way our business is oriented that the impacted similar up and down the P&L, the only and normally ever so slightly we just be at the OpEx line where we do have a modest amount of expenses denominated in dollars. But it’s not material.
Caroline Levy – CLSA
Okay, thanks. And then did you give cost of goods increase per case?
I’m sorry, I missed this.
John F. Brock
Yes. What, just as a reminder what we said on the December outlook call, was we were foreseeing a cost of goods per case increase of approximately 4%.
And today what we said was we expected it to be up approximately 3.5% to 4% cost of goods sold per case. That’s reflecting actual numbers in a ‘11 that we’re comparing to versus an estimate as well as continuation of our procurement and hedging strategies.
Caroline Levy – CLSA
Great. Could you characterize a little bit the tone of the retail environment and the consumer environment in the UK and France right now?
Your…
William W. Douglas III
Well, I think it’s
Caroline Levy – CLSA
Obviously because I know that, sorry, I know some retailers more in the high-end are reducing inventories and things like that, that’s why I asked this question.
William W. Douglas III
Well, let me just make a broad comment and then Hubert to add something to it. That’s fine.
The customer situation is obviously a challenging one and I’m sure you’ve read a number of articles publicly about some of the challenges that are ongoing in the customer situation. And consumers continue to be, I would say more fragile than we like for them to be.
But we don’t see dramatic changes in either one of those. We’ve managed through those customer challenges previously, and we’ll manage through them again, as Hubert has said.
And on the customer front, I’d say the same thing. It’s purely, the austerity programs throughout Europe were impacting consumers and their thinking.
But we operate in a category, which has been showing for a number of years to be expandable and we think that’s going to continue.
Hubert Patricot
Yeah, I think it’s fair to say that, they are be cautious entering in 2012, I mean, it reminds a bit of 2009, I mentioned just a while ago, which means they are working on a Gulf side, and frankly as we share when you’ve been rated number one by our customer, in particular in GB and France, because I think we’re going to work with them on this customer study, inventory management pretty accurately. But at a same time, what we sell them is really our ability to grow the category and put them in front of growth of the [shopping] category in this difficult environment.
And clearly, especially true in GB, the Olympic 2012 is the best occasion to shake this consumer pattern. And so I think, if we look at our junk operations with the retail, I think it’s pretty positive today looking forward.
We will have a new activation on the Olympics starting already in March, in most of our countries. And again the trade probably need these kind of activities even more so in today’s environment.
Caroline Levy – CLSA
Thank you very much. Lastly, just any innovations either in packaging or products that you see coming this year that it was mentioning?
Hubert Patricot
Again, we think one of the answer to continue our joint value creation is the retail on the trade, both due to a consumption, and midyear consumption is as you say, innovation and packaging innovation. The main one I’d like to highlight is introduction of the 375 PET for immediate consumption, which will start in GB, and we know it’s a good proposal to be included in meal deal, combo deals in GB, so we’re pretty excited by this launch.
Caroline Levy – CLSA
Thank you.
John F. Brock
You’re welcome.
Operator
Our next question comes from the line of Judy Hong of Goldman Sachs.
Judy Hong – Goldman Sachs
Thanks, good morning. Just following up on Great Britain, may be just a little bit color just relating to the competitive environment.
In fourth quarter your volume was a little bit faster than what you’ve seen in for the balance of 2011. Sounds like there was pretty heavy promotions are your competitors still just frame for us, what’s going on in terms of the competitive landscape and as we entered this year, are you still seeing a pretty impact competitive activity and then as we get near the Olympics just given that you have a pretty strong activation program.
We think that it’s reasonable to just think that you’ve a got better, I guess opportunity to gain more share as the year progresses.
Hubert Patricot
Judy, we have know the full year picture for GB, which is inline or even slightly above our expectations with an accelerated volume gross of 2.5%. Having said that during the year, we expect to see some share pluses and minuses driven inside by personal timing prior year comparables and current paying activities, so our focus remain on the long-term gross and we achieve to keep our value share in GB in 2011, and slightly grew, we slightly grew our volume share.
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Judy Hong – Goldman Sachs
Okay, and then just following up on the energy portfolio. It sounds like fourth quarter was another very strong quarter for you, I think is the 40%.
Just talk about how sustainable that type of growth is, is there more either product or distribution opportunities that will continue to feel that growth going forward?
Hubert Patricot
I would say it's a balance profile, because we have increased our distribution mainly in the [Independents] in GB, with Monster and Relentless, and also on the continent. Moving forward, we’re also banking a lot on innovations.
We introduced for example, (inaudible), ZERO with Monster that it’s a very, very I’d say encouraging growth. And we are frankly banking for performing at the same level moving forward.
So we’re really encouraged by the success of our energy portfolio driven mainly by Monster, Relentless in GB, but also (inaudible) in the continent. So, it’s a source of growth and profitable growth with a category which is really healthy in all country especially in GB.
Judy Hong – Goldman Sachs
Great, thank you.
Operator
Your next question comes from the line of Bryan Spillane of Bank of America.
Bryan D. Spillane – Bank of America/Merrill Lynch
Hi, good morning. Couple of questions, first just, I think in December when you gave revenue guidance you also gave an expectation that you'd see volume growth for all territory.
Is that still your expectation for 2012?
William W. Douglas III
Yes, that is our expectation. As you know, when we talk about the metrics that we expect to achieve and to be judged against, we don't actually talk about volume growth, we talk about revenue growth, which is a combination of volume price, and mix.
But, yeah we did say in December, and we would say again that certainly we're regardingly optimistic that even in France, which is obviously going to be impacted by the excise tax. We're regardingly optimistic that we’ll grow volume in all countries.
Bryan D. Spillane – Bank of America/Merrill Lynch
And then in terms of, I guess both price elasticity in France, but even more broadly just thinking about that the impact of the, the weakness in the consumer, which business is more sensitive or more elastic, is it that the immediate consumption or the take-home business?
Hubert Patricot
John F. Brock
Hubert Patricot
,
Bryan D. Spillane – Bank of America/Merrill Lynch
Okay, just fair to say the confidence in your volume outlook for 2012 with at least partially driven by your confidence or your ability to sort of capture the consumer whether it’s a immediate capture that shifted if it goes from immediate consumption to future consumption.
Hubert Patricot
Absolutely.
Bryan D. Spillane – Bank of America/Merrill Lynch
Okay. And then just one last follow-up on just on Norway.
Is there anything that the trade has to do to, what that to your shift from refillable to one way packaging is the recycling, is the infrastructure there from recycling and just anything that we need to be done on the trade?
Hubert Patricot
Bryan D. Spillane – Bank of America/Merrill Lynch
Okay, great. Thank you.
Operator
Your next question comes from the line of John Faucher of JPMorgan.
John Faucher – JPMorgan
Thank you. Just sort of following up a little bit on Brian’s question which is, he talked about the volume expectations and giving your earnings expectations, which you’re pushing a little bit more back weighted.
And then also you’re big programs behind the Euro Cup as well as the Olympics? How much volatility or rather how much of variability will we see volume wise as we go through the year?
I mean, should we expect a dramatic ramp up in volume after the French consumer sort of get used to the pricing? Or do you think it’s going to be relatively smooth over the course of the year?
William W. Douglas III
Hey John, it’s Bill. I’d start out first by just looking at our 2011 performance.
We started really strong with 5.5%, I believe it was in Q1, 5% in Q2, then it dropped down in Q3 and then back up in Q4. So that’s the starting point, as looking at the comps that we’re cycling in ’11 and then the factors that we’re dealing within 2012, the start of the year with the French excise tax in Q1; and then with the Olympics in Q3.
So again, I think if you look at the variability that we had in 2011, I would think the quarter-by-quarter variability at this juncture would hopefully be no greater than what we saw in 2011, but its early days.
John Faucher – JPMorgan
Okay, great, thank you.
William W. Douglas III
Okay, operator we have time for one more question.
Operator
So our final question comes from the line of Alec Patterson of RCM.
Alec Patterson – RCM Investments
Yes, thank you and it’s a quick one. I just wanted; I’m sorry, repeat the Q4 volumes for Norway, Sweden and regarding the 6% volume and continental area in Q4, is there any sort of preloading before the soda tax went into affect that’s playing with that numbers or there is a bit of a shift going on?
William W. Douglas III
Alec just to start out, we did not specifically disclose the volume growth for Norway and Sweden, but it was low single-digits.
John F. Brock
Yeah, historically we don't seem to give that detail. We gave the continental results at 6% in GB at one and in terms of the buying we thought that our team managed and did exceptionally well in fact, so it was not integrated than we thought it would be, particularly in France with the big excise tax.
So, our team did a great job.
William W. Douglas III
Okay.
Alec Patterson – RCM Investments
I'm sorry, just to be clear two things. One, is Norway, Sweden part of your continental volume number?
William W. Douglas III
No.
Alec Patterson – RCM Investments
Okay. So it is a separate number.
You just don't disclose it?
William W. Douglas III
We did not have it in the release. As I've said it was low single-digits.
Alec Patterson – RCM Investments
Okay, all right. Thank you.
John F. Brock
Okay and let me say thanks again to all of you for joining us today. We appreciate your interest and we hope you have a terrific day.
Goodbye.
Operator
Thank you again for participating in today's conference call. You may now disconnect.