Coca‑Cola HBC AG Turmstrasse 26, CH-6312 Steinhausen, Switzerland www.coca-colahellenic.com investor.relations@cchellenic.com sustainability@cchellenic.com Coca‑Cola HBC Integrated Annual Report 2021 The paper used in this report is FSC® certified. Theprinter is ISO 14001 accredited. Under the framework of ISO 14001 a structured approach is takenby the company to measure, improve and audit their environmental status on an ongoing basis. FSC® ensures there is an audited chain of custody fromthe tree in the well-managed forest through to the finished documentin the printing factory. Designed and produced by Black Sun Plc Coca‑Cola HBC Integrated Annual Report 2021 ### Integrated Annual Report 2021 Coca‑Cola HBC Integrated Annual Report 2021 ## Boldly embracing ## the future ### 2021 highlights Volume (m unit cases) Net sales revenue (€m) | 2,412.7 | | 7,168.4 | | | --- | --- | --- | --- | | 2020: 2,135.6 | | 2020: 6,131.8 | | | | 1 | | 1 | | Comparable EBIT | (€m) | Comparable EBIT | margin (%) | ## 831.0 11.6 2020: 672.3 2020: 11.0 2 Profit before tax (€m) Net profit (€m) ## 734.9 547.2 2020: 593.9 2020: 414.9 1 Comparable EPS (€) Basic EPS (€) | 1.584 | 1.499 | | --- | --- | | 2020: 1.185 | 2020: 1.140 | | Primary packaging collected | Energy-efficient coolers | forrecycling(equivalent) ## 42% ## 46% 2020: 36% 2020: 44% 1. For details on APMs, refer to ‘Alternative performance measures’ section. 2. Net profit refers to net profit after tax attributable toowners of the parent. ### Contents | Strategic Report | Corporate Governance | | Swiss Statutory Reporting | | | --- | --- | --- | --- | --- | | 2 Chairman’s letter | 84 Chairman’s introduction | | 212 Report of the statutory auditor | | | 4 Chief Executive Officer’s letter | | tocorporate governance | | onCoca‑Cola HBC AG’s | | 6 Our business at a glance | 88 Board of Directors | | | consolidated financial statements | | 8 Our business model | 92 Corporate Governance Report | | 216 Report of the statutory auditor | | | 10 Stakeholder engagement | 118 Directors’ Remuneration Report | | | onCoca‑Cola HBC AG’s financial | | 14 Market trends | 141 Statement of Directors’ | | | statements | | 16 Our purpose and strategy | | responsibilities | 219 Coca‑Cola HBC AG’s financial | | | | 142 2021 SASB index | | | statements | 18 Leverage our unique 24/7 portfolio 232 Report of the statutory auditor 24 Win in the marketplace Financial Statements onthe remuneration report 30 Digitalisation across 146 Independent auditor’s report 233 Statutory Remuneration Report Coca‑ColaHBC 154 Financial statements 32 Fuel growth through Supplementary Information 159 Notes to the consolidated competitiveness and investment financialstatements 237 Alternative performance measures 38 Cultivate the potential 241 Other supplementary information ofourpeople 242 Assurance statement 44 Earn our licence tooperate 246 Glossary 52 Key performance indicators 54 Sustainability performance 56 Managing risk and materiality 72 Viability statement 74 Financial review 78 Segment highlights 80 Non-financial reporting directive ## 70 years of Coca‑Cola HBC ## The early years European consolidation ## 1951-1980 1981-1999 1981: Hellenic joins thefamily Our company started the 1980s 1951: Nigeria, where it all began with a statement of ambition, Coca-Cola HBC’s early beginnings were acquiring the Hellenic Bottling inNigeria, where A.G. Leventis established Company (HBC) of Greece. theNigerian Bottling Company in Lagos. 1991: A defining period We reached an historic milestone as the Coca‑Cola HBC group wentpublic on the Athens stockexchange. 1953: Coca‑Cola production begins Production of Coca-Cola | began at a bottling facility in | 1956: Honoured | | --- | --- | | Ebute-Metta, Lagos, Nigeria, | byroyalty | | in 1953, with our first bottling | An early honour for the new | | plant opening in Apapa that | business came in 1956 when the | | same year. | young Queen Elizabeth II visited | 1990s: Eastern Europe the Nigerian Bottling Company The dramatic collapse of the Soviet Union in as part of her tour of Nigeria. 1991saw a wave of change and new hope sweep across Eastern Europe and the former Soviet republics, presenting exciting new opportunities for Coca‑Cola HBC across the region’s fledglingdemocracies. 1977: From Africa to Ireland In 1977 the company expanded outside 1999: Arriving in Russia ofAfrica, acquiring the Coca-Cola franchises These heady days of the 1990s also saw Coca-Cola inIreland. HBC take its first steps in Russia. It was a significant move for our business, which was completed in2001. ## European expansion 2000-2012 ![img-0.jpeg](img-0.jpeg) ### 2000: New markets, new cultures The start of the new millennium saw the merger of the Hellenic Bottling Company with Coca-Cola Beverages – forming Coca-Cola Hellenic Bottling Company S.A. This brought new territories, more cultures, and more opportunities to grow. ![img-1.jpeg](img-1.jpeg) ### 2001: Dreams really do come true We assume, 'the amazing plant' is Russia from The Coca-Cola Company, as well as the bottling rights that we didn't already see. We quickly invested in our Russia business, creating more jobs and opportunities for local communities. ![img-2.jpeg](img-2.jpeg) ### 2005: Pioneering sustainable technology The new high-ground, sustainability journey by opening our first energy-efficient Combined Heat and Power plant in Hungary. ![img-3.jpeg](img-3.jpeg) ### 2005: Great Coke taxis, zero sugar As consumer preferences changed, The Coca-Cola Company introduced Coca-Cola Zero. It was a move that would go on to drive the Sparkling category to this day. ## The Coca-Cola HBC we know today 2013 to the present day ![img-4.jpeg](img-4.jpeg) ### 2016: Serving up an aperitivo icon Adult Sparkling is a high-value, high-growth category. We are proud to have activated socialising away from home with our portfolio of mixers and straight-drinking flavours for almost two decades. ![img-5.jpeg](img-5.jpeg) ### 2013: A listing in London, a proud moment Coca-Cola HBC reached a landmark as it made its debut on the premium segment of the London Stock Exchange. It was also the year that the company was registered in Switzerland with new headquarters. ![img-6.jpeg](img-6.jpeg) ### 2020: Smell the coffee! We made one of our biggest moves to expand our 24/7 portfolio in 2020 when we introduced COSTA Coffee, recently purchased by The Coca-Cola Company, to our first markets. In 2021 we strengthened our coffee offering with a 30% shareholding in Caffè Vergnano. ### 29 markets, one family In 2021 we announced the acquisition of Coca-Cola Bottling Company of Egypt, our second market in Africa and the 29th in the Coca-Cola HBC family. The deal was completed in early 2022. ![img-7.jpeg](img-7.jpeg) ## Visit us ### www.coca‑colahellenic.com Write to us The Group site features all the latest news We have dedicated email addresses which and stories from around our business and you canusetocommunicate with us: communities, as well as an interactive investor.relations@cchellenic.com online version of this report. sustainability@cchellenic.com 1INTEGRATED ANNUAL REPORT 2021 ## Through the decisions that we ## Boldly embracing ## have made over time and are ## the future making today, we are ensuring ## that our business is ready for ## what the future may hold ### Future‑focused ## portfolio page 23 ### Future‑focused ## route to market page 29 ### Future‑focused ## investment page 37 ### Future‑focused ## teams page 43 ### Future‑focused ## packaging page 51 2 COCA-COLA HBC ### Chairman’s letter ### Dear Stakeholder, Our Company celebrated the 70-year ## Embracing new history of the business in 2021, a milestone which led us to reflect on what we have achieved even as we embrace new opportunities. The COVID-19 pandemic ## opportunities tested our entire business and every one ofus. Now, at the start of 2022, in addition toCOVID‑19, the conflict between Russia and Ukraine is having a terrible impact on ## “As always, we look to the long‑term potential millions, including our own people. I have ## ofthe business to ensure that we are making the seen through the challenge of COVID-19 and now, through this current unimaginable ## progress that would make those who passed its tragedy, the amazing way that the people ## stewardship onto us proud, and with a view to ofthis business care for each other and ourstakeholders. It makes me immensely ## thefuture generations who will take it over.” proud. Our resilience and adaptability are ourgreatest strengths. The recovery in our Company’s performance in 2021 was very strong. Wefinished 2021 with volumes, revenue andprofitability all greater than in 2019. Thisrebound is largely due to the long‑term and thoughtful approach the company took in the beginning of the pandemic in 2020. The Board and Management were clear that our people and business continuity were our top priorities. This meant that no one lost their job at Coca‑Cola HBC as a direct result of the pandemic, we maintained supply for our customers, continuing to engage with them even when their businesses were closed, and we continued to invest in strategic priorities for the long-term health of the business. From its origins as a bottling line in the basement of the Mainland Hotel in Lagos, Nigeria, it is incredible to reflect on the journey which has transformed this family- run business into a FTSE 100 company operating across 29 markets onthree continents. With our roots in Africa, we areextremely pleased to be welcoming theteam from another African market to theGroup 70 years later. Egypt offers tremendous potential, with a young population of over 100 million people. I’vebeen fortunate to meet many of the men and women of Coca‑Cola Bottling Company of Egypt, and I know that they share our passion for excellence. 3INTEGRATED ANNUAL REPORT 2021 | Our long history of geographic and portfolio | In 2021, the Board approved our most | Together with The Coca-Cola Company | | --- | --- | --- | | expansion, often through acquisitions, will | ambitious environmental target to date, | wetook the difficult but necessary decision | | serve us well as we integrate the Egyptian | committing to achieve net-zero emissions | to suspend the production and sale of | | business into our Group. Our Board also | by 2040. This commitmentbuilds on our | Coca-Cola brands in Russia. We have been | | benefits from several members who have | long history of integrating our social and | operating in Russia for decades and will | | experience of large integrations and will be | environmental commitments into every | support our colleagues there as we work | | available to offer advice and guidance. | decision and action we take. Because we | through the implementation of this. | | | believe that our environmental impact along | Thecompany continues to provide support | | Bold decisions support resilience | with the socio-economic development of | on the ground through product donations | | | our communities are integral to our future | and in partnership with The Red Cross. | for the long term growth, NetZeroby40 has been integrated Iknow I speak for the Board when I say that In my time as chairman, I’ve seen how our into management incentives. the people of Ukraine and our colleagues Company benefits from the Board’s great there are foremost in our thoughts. We hope diversity of perspectives. Six of our 13 Dividend that peace is soon restored in Ukraine. Boardmembers were originally appointed byourtwo large, long‑term shareholders: During 2021 we paid the 2020 dividend of In early 2022, we remain focused on TheCoca‑Cola Company and Kar‑Tess €0.64 per share. This was a 3.2% increase supporting management as they operate Holding, which gives the Board particularly compared to the prior year and represented inthis incredibly challenging and rapidly relevant industry and partnership knowledge an increase in our pay-out ratio to 54%, changing environment as well as overseeing as well as a uniquely long-term perspective above our usual targeted range of 35 to 45%. the Company’s achievement of our Growth and sense of ownership. This is strengthened Story 2025 objectives. As always, we look to We are pleased to be able to continue to and complemented by the other independent the long-term potential of the business to make progressive dividend payments and directors’ range of skills and experience ensure that we are making the progress are proposing a dividend of €0.71 per share ensuring a wide range of contributions and thatwould make those who passed its for 2021. Furthermore, we have increased high-quality discussion. stewardship onto us proud, and with a view the targeted pay-out range to 40 to 50% ofcomparable EPS. This decision reflects our to the future generations who will take it over. In a period of upheaval and uncertainty, theBoard has made decisions carefully assessment of the ongoing risks combined On behalf of the Board, I extend my thanks andthoughtfully to ensure our Company with our confidence in business resilience to all of our people who have built the ispositioned for success for the long term. and the Company’s strong balance sheet, Company into what it is today, and to all of In 2020, and again in 2021, we ensured that aswell as our many growth opportunities. our stakeholders for your continued support. we focused on our most critical people first, | our business developers who are out in the | Looking ahead | | | --- | --- | --- | | market every day selling our portfolio of | As we welcome Egypt into the Group, I | | | products. Decisions taken on remuneration, | continue to have great confidence in our | | | particularly for our long-term incentive | Company’s future. In 2021 this company | | | plans, ensured awards cascaded throughout | achieved a remarkable recovery while | | | the organisation, reinforcing focus on | managing a volatile environment of changing | Anastassis G. David | | strategic priorities to achieve long-term | restrictions due to COVID-19, global supply | Chairman of the Board | | performance and the retention of our | chain shocks and even geopolitical instability | | | dedicated, high-performing people. | in our territory. As I write we have seen | | | Ourremuneration decisions consider both | conflict bringing unimaginable suffering and | | | the whole organisation and the long-term | hardship to millions. | | health of the business. During 2021 we embarked on a wide-ranging shareholder consultation process, which has helped us understand the full range of views on these decisions and informed our thinking. Section 172 statement Section 172 of the UK Companies Act 2006 requires directors to promote the success of their company for the benefit of the members as a whole, having regard to the interests of stakeholders in their decision-making. Engaging with stakeholders is an indispensable part of how Coca‑Cola HBC does business. TheBoard considers the interests of the Group’s employees and other stakeholders in its decision- making as a matter of good governance, and understands the importance, and value, of taking into account their views, as well as considering the impact ofthe Company’s activities on the community, environment and the Group’s reputation. The Board also considers what is most likely to promote thesuccess of the Company for its shareholders in the long term. Although the Company is Swiss- incorporated and as such the UK Companies Act 2006 has nolegal effect, thisapproach is in accordance with the UK Corporate GovernanceCode 2018. Read more about: How we manage risks and materiality on pages 56 to 71 How we engage with key stakeholders on pages 10 to 13 Examples of how stakeholders were considered in specific decisions on pages 100-101 4 COCA-COLA HBC ### Chief Executive Officer’s letter ### Dear Stakeholder, As I write in March 2022, my thoughts are ## Building withour friends, colleagues, and their families in Ukraine. I speak from personal experience when I say that there is nothing worse than war. It is never a solution. It brings terrible ## partnerships suffering and pain, and it impacts the lives ofpeople like nothing else. We are facing up tothat now as we do all we can to support our people in Ukraine and the humanitarian relief ## “I am especially proud that even in these most efforts in the region. My overriding hope is for a fast and peaceful resolution. ## challenging of times, we are nurturing a strong This report looks back to 2021, a year that ## team that genuinely cares for one another, sawa very different challenge in the form of the continued disruption of the COVID-19 ## underlined by resilience and belief in our future. pandemic to communities and businesses ## We remain focused as one connected team across our territories. ## onboth what we are trying to achieve and It was also a special year for us as we marked70 years of building partnerships ## howwe will deliver it.” sinceour early beginnings in Nigeria in 1951. Thismilestone provided an opportunity to celebrate the legacy of our business and reflect on how we define our Company for today and tomorrow. The spirit of partnership that has guided us for 70 years remains the cornerstone of our approach. It has enabled us to adapt and evolve our business with a strong belief and commitment in our investments that will fuel our future growth. Our people remain the catalysts, making our Company stronger and better every day. We rely on their talent and diversity to set us apart – because the real magic happens when we work together as one inclusive team. By harnessing the collective talent across our markets, we are confident that we will achieve the speed and progress that will enable us to lead and to win for thelong‑term. Delivering a strong recovery We delivered a very strong recovery in 2021, with all key metrics above pre-pandemic levels. This was the result of consistent and disciplined focus on our strategic priorities over the last few years. We finished the year with strong revenue growth, our highest everEBIT margin and free cash flow, while continuing to gain share. This performance demonstrates the strength of our 24/7 brandportfolio, revenue growth management capabilities, route to market and execution excellence in our markets. It is thanks to the strong drive, creativity, adaptability, and passion of our people, who enabled us to navigate the volatile operating environment while embracing change, challenge and care, which are all central to ourculture. Our results and future plans also reflect our partnership with The Coca-Cola Company, which remains stronger than ever. 5INTEGRATED ANNUAL REPORT 2021 Accelerating capabilities Our boldest sustainability examples of this. Today, more than 70% ofour learning content is available online, development commitment to date andthis has allowed us to innovate, adapt A critical driver of our growth is the 2021 was also a pivotal year in our andaccelerate to new ways of learning. accelerateddevelopment of our prioritised sustainability journey with our commitment Thewhole team is committed to building capabilities, which are increasingly proving tonet zero emissions across our value chain amore diverse workforce in an inclusive tobe our competitive advantage for building by 2040, a continuation of a journey we began workplace environment. It is a commitment sustainable long-term growth. Talent many years ago. We are confident in our track that I am personally passionate about and we development, Revenue Growth Management, record and our robust, action-based plan to have made some good progress. In 2021 56% Route to Market, Big Data Advanced Analytics achieve this commitment. But we will also of all appointments were women. | and KeyAccount Management are now also | need the support of our partners, with 90% | | | --- | --- | --- | | complemented by the accelerated Digitalisation | ofour emissions coming from suppliers | 2021 also saw us conduct a comprehensive | | of our Company. | throughout our value chain. Our commitment | review of our business to ensure that our | | | to net zero is now integrated into every | organisational structure and teams are | Targeted investment behind our Digital business decision we take. designed to support our strategic big bets Commerce strategy, regarding both route forfuture growth. To pursue our vision of tocustomer and route to consumer, is a key Our sustainable packaging strategy is a key being the leading 24/7 beverage partner, focus in this area. This is supported by a newly driver towards net zero. We are committed weenhanced our resources and expertise in established and capable team that is driving todelivering our Mission 2025 targets and coffee, digital commerce, data and analytics, anambitious agenda. The Customer Portal, working towards a World Without Waste with and sustainability. And I was pleased to our main B2B platform, which saw significant The Coca-Cola Company, developing ways seethat 85% of appointments were development over the last 18 months, allows tocollect more packages and design new internalcandidates. | our customers to order direct from us 24 | sustainable ways of serving our beverages. | | | --- | --- | --- | | hours a day, 7 days a week. This now accounts | In2021, we transitioned to 100% rPET for all | The introduction of the COO role in 2020 | | for 8% of our transactions, up from 2% just | single serve Sparkling Soft Drinks and iced-tea | hasenabled us to strengthen our leadership | | ayear ago. It is convenient for customers, | in Italy and now sell five water brands in 100% | capacity, performance edge and coordination | | andcritically, it allows our business developers | rPET bottles. With targeted initiatives to | as well as sharpen our focus on people | | to spend more time on category strategy | increase our in-house production capacity for | development. The structure enables me to | | execution and customer relationships rather | rPET, we are taking a meaningful step towards | spend more time on our strategic partnerships, | | than order taking. | our target of increasing the percentage of | strategic agenda and targeted prioritised | | | rPET to 35% by 2025. | areas, like culture and D&I, which I oversee | We also continue to add value to our personally. I am also able to invest more time customers in the broader e-marketplace. The Coca-Cola Company also made a global behind our sustainability and regulatory agenda. | Wehave increased our digital shelf space, | commitment to increase the percentage of | | | --- | --- | --- | | visibility, and activations on the e-commerce | beverages sold in reusable packaging to 25% | We also created a new role of Strategy and | | websites of our biggest customers, and we | by 2030. To support this goal, we have already | Transformation Director in 2021. The role | | are now working extensively with newer, | started our journey together to increase | isdesigned to drive more efficient and | | digital-only customers, such as food delivery | our‘packageless’ offerings through new | bettercoordinated strategy execution by | | platforms, which is driving strong growth. | dispensed solutions and this strategy will | transforming our enterprise-wide processes | | | remain a focus for the coming years. | and projects from the start. This will drive | | New markets and brands | | better simplification, prioritisation and create | Our successful partnership with our suppliers I am very pleased that during 2021 we more time for customer focused initiatives. saw us introduce KeelClip™ in 10 markets completed two strategic transactions which bythe end of 2021, a paperboard packaging Our 70th anniversary last year also gave are strengthening our growth potential. that replaces plastic shrink wrap on multipack metime to reflect on my 25 years with the Thesedemonstrate very well our focus on cans. The roll out in our EU markets will be Company. I am as proud today to work with strategic additions to our territories alongside completed this year. We also continue to my colleagues across Coca‑Cola HBC as I was relevant bolt-on additions to our portfolio. invest in infrastructure to collect and recycle when I first walked through the doors of the our packaging to ensure a circular packaging Zagreb office all those years ago. With our acquisition of Coca‑Cola Bottling economy. We now have deposit return Company of Egypt (CCBCE), our Company I am especially proud that even in these most schemes in place or in progress in 12 of our has added a second market in Africa, 70 years challenging of times, we are nurturing a strong markets, and work with governments, NGOs after the Company was founded in Nigeria. team that genuinely cares for one another, and academic institutions to determine the This means that we now seek to refresh one underlined by resilience and belief in our future. right schemes everywhere we operate. quarter of the continent’s population. Egypt’s We remain focused as one connected team young and rapidly growing population of more I am proud of the support that we continue on both what we are trying to achieve and than 100 million people brings our consumer toprovide to our communities, particularly the howwe will deliver it. While we look back at our base to over 715 million, while positioning opportunities we give to young people to help achievements, we recognise there is much ustowards high‑growth markets that will them develop their full potential. In 2018, we more to learn and improve. I am truly grateful fuelour business for many years to come. promised to train one million young people to be part of a team that is driven by deep Iamgrateful for the trust placed in us by by2025 via our flagship #YouthEmpowered values, continues to have ambitious bold TheCoca‑Cola Company and the previous programme, and to date have supported dreams, and is committed to creating value shareholders of CCBCE, and am very more than 548,000. inthe market with our customers, while making excitedabout the potential of the business avisible difference to the world we care for. anditspeople. Investing in our people and | We also acquired a 30% stake in Caffè | nurturing our values‑based culture | | | --- | --- | --- | | Vergnano, a family-owned Italian coffee | We also remain steadfast in our commitment | | | company, further strengthening our | to invest in our people, their potential, and | | | coffeeportfolio. Caffè Vergnano is highly | support personal and professional growth | Zoran Bogdanovic | | complementary to our existing Costa Coffee | through a variety of learning and developmental | Chief Executive Officer | | proposition and will allow us to address an | programmes. Our Sales Academy, Supply | | | even wider range of consumer tastes and | Chain Academy, Excel leadership programme | | | segments, increasing our relevance in this | and our annual LearnFest event are some | | fast-growing category. 6 COCA-COLA HBC ### Our business at a glance ### Coca‑Cola HBC is a growth‑focused consumer ## The leading 24/7 packaged goods business and strategic bottling ### partner of The Coca-Cola Company. ## beverage partner Sparkling Hydration Juice ### Our 24/7 portfolio Our portfolio is the strongest ## and broadest in the beverage 74% 7% 4% Percentage ofCoca‑Cola HBC revenue industry. Our products cater toagrowing range oftastes with a wider choice of healthier options, premium products andincreasingly sustainable packaging, giving us an undisputed ability to delight consumers across all consumption occasions. RTD Tea Energy Coffee ## 3% 6% <1% SnacksPlant based Premium spirits and flavoured alcoholicbeverages ## 3% <2%<1% 7INTEGRATED ANNUAL REPORT 2021 ### Winning in the marketplace ## We produce and sell an unparalleled +90bpsbps portfolioof beverage brands relevant to value share gained in NARTD every customer, consumer and occasion. Our route to market is second to none across our markets since it includes a widerange of consumer channels – from supermarkets and convenience stores tohotels, cafés andrestaurants – and encompasses more customers than any competitor. Customer service and focus is critical for ourbusiness and we are devoted to helping our customers grow their businesses, which inturn grows ours. ### Where we operate In 2021 we celebrated our 70th year. Our roots date back to 1951 when A.G. Leventis founded the Nigerian Bottling Company in Lagos. Since then the business has expanded across Europe and Russia, and in 2022 we added Egypt. Today we seek to refresh 715 million consumers in 29 markets, spanning three continents. ## 29 36,000 countries across three continents employees | Established markets | Developing markets | Emerging markets | | --- | --- | --- | | 34.6% | 19.0% | 46.4% | | of Group revenue | of Group revenue | of Group revenue | | 12.1% | 7.8% | 12.7% | Egypt Comparable EBIT Comparable EBIT Comparable EBIT added margin margin margin in 2022 ### Earning our licence ### tooperate We create value for all stakeholders, making a strong contribution to the development ofthe societies in which we operate through employment and our wider supply chain, aswell as through community projects which have long been a core way of doing business for us. We operate in a way that preserves our environment, integrating sustainability into our decision making and actions. 8 COCA-COLA HBC ### Our business model Our business model ## Delivering value for ## ourstakeholders 1. Our resources and relationships 2. How we do it Human Our success is dependent on the passion and customer focus of our talented people. We empower them to pursue growth opportunities, both for themselves and our Company. Natural To produce our products, we use raw materials including water, energy and 1. Working with suppliers 2. Producing beverages PET resin. We source these using We work with our suppliers efficiently and sustainably sustainable practices and seek to use toprocure high-quality Using concentrate from ingredients, sustainably them efficiently. TheCoca-Cola Company sourced raw materials and alongwith other ingredients, equipment and services weprepare, package and deliver Social and relationships required to produce beverages. products with an optimised Maintaining the trust of stakeholders manufacturing infrastructure and logistics network. isessential to our business. Our most valuable relationships are with ## 56 96 TheCoca‑Cola Company, our people plants distribution centres and the communities we operate in, our customers, suppliers and governments and regulators. | | 4. Serving our consumers | 3. Partnering with | | --- | --- | --- | | Financial | and communities | ourcustomers | | Our business activities require financial | Our 24/7 product portfolio | We grow by supporting our | | | catersto a range of tastes and | customers’ growth, leveraging | capital and we seek to allocate it preferences and we continually our 24/7 portfolio, focusing on efficiently. This capital is provided by our innovate to remain relevant. areas of high value opportunity equity and debt holders, as well as cash and executing with excellence. flow earned from our operations. Intellectual Innovation is embedded in our culture andthe intellectual property created from that includes new packaging, new products and improvements in manufacturing, logistics and sales execution. Manufacturing Our plant and logistics assets allow ustoprepare, package and deliver ourproducts to meet the needs | ofcustomers and consumers. | 3. What we do | | | --- | --- | --- | | | We are a strategic bottling partner | is responsible for producing, distributing, and | | | ofTheCoca-Cola Company | selling these beverages, using concentrate | | | We have the exclusive right to bottle | we buy from The Coca-Cola Company | | | andsell the beverages of The Coca‑Cola | under an incidence-based pricing model. | | | Company in our 29 markets. We also | We work together to ensure we have the | | | partner with other beverage businesses | right portfolio for our customers and | | | such as Monster Energy, Brown‑Forman, | consumers in each market and to ensure | | | Campari and Edrington to sell their | excellent, efficient execution. We also share | | | products inourmarkets. | marketing costs and responsibilities, with | The Coca-Cola Company marketing to How our partnership works consumers while we take responsibility The Coca-Cola Company owns and Read more about how we leverage our fortrade marketing to our customers. develops its brands while Coca‑Cola HBC unique 24/7 portfolio and win in the marketplace on pages 18 to 29. 9INTEGRATED ANNUAL REPORT 2021 | Our impact | procuring raw materials, transferring | Measuring and managing these contributions | | --- | --- | --- | | We believe that the only way to create | technology, paying taxes, expanding access | through the sustainable growth of our | | long-term value for all our stakeholders | to products and services, and creating | business is an important partof our purpose. | | isthrough sustainable growth. We create | growth opportunities for our customers, | Since 2010 we have conducted socio- | | socio-economic value for the societies in | distributors, retailers and suppliers. | economic impact studies in our markets | | which we operate by creating jobs, training | | tobetter understand the range and extent | | workers, building physical infrastructure, | | ofthe value created inourecosystem. | 4. Value created 5. Socio‑economic contribution Our people • In 2021 we provided jobs directly to 27,211 ## people in 28 countries 796,942 training hours for • Median basic salary ratio women/men: 1.15 ## our people €1,015.2m total employee costs Our customers ## 31,920 ## • We increased the frequency of our customer 1.7m employees in the Coca-Cola engagement, providing customers with customers served System in our markets thebest support • In the marketplace we achieved anew totalnumber of almost 577,000 energy‑efficientcoolers | | 1 | | 10 | | --- | --- | --- | --- | | Our communities | | = | | | | job in the | | jobs in our | • We trained 210,422 young people through ## 548,835 | | System | community | | | --- | --- | --- | --- | | our #YouthEmpowered programme | | | 2017-2021 cumulative | | toboost employability | | | young people trained in | ourcommunities • We invested €6.8 million in local community initiatives ## 320,311 indirect employment across thevalue chain Our shareholders • We continued to control costs and generate strong growth in profit • In recognition of our business’s strength and future opportunities, the Board has proposed a dividend of €0.71 per share, a +10.9% increase compared with last year ## €11.5bn Our wider stakeholders created in added value across • Our business activities generate revenue ## €3.4bn our value chain forour customers, suppliers and contractors paid in taxes as well as income for our employees ## €541m CapEx spend in our markets Our consumers • We provide high-quality beverages and healthy options, reducing calories per 100ml ### * of sparkling soft drinks by 15% in 2021 ## 715 m compared to our 2015 baseline potential consumers refreshed ## 16,200 suppliers operating Our suppliers acrossour value chain • We spent over €3.5 billion with local suppliers • We are working with our suppliers to support ## >€3.5bn their sustainable practices and emission spent with local To read the methodology behind reduction plans suppliers our socio-economic impact numbers, please see page 247 * With the addition of Egypt. 10 COCA-COLA HBC ### Stakeholder engagement ### The strength of our stakeholder ## Building on 70 years ecosystem enabled us to ### ensure the safety of our people, ### partners and communities while ## ofstakeholder ### maintaining production ### throughout the year. ## engagement for ## mutualbenefit How we engage Relevant KPIs • Focused and continuous conversations • Employee engagement • Employee Assistance Programme • Percentage of managers that are women ### Our people • Regular employee surveys to understand • Lost time accident rate and act on needs and wellbeing Principal risks • Offering personalised experiences and Material issues • Health and safety opportunities for personal and • Employee wellbeing and engagement • People retention professional growth • Human rights, diversity and inclusion • Geopolitical and security environment • Ongoing dialogue with employee Growth pillars representative bodies Read more on pages 39-43. Outcomes of engagement • Support for our people to maintain | Key challenges | | | engagement levels, which remained | | --- | --- | --- | --- | | • Building the best teams in the industry | | | highin 2021 | | • Engagement as remote working | | • Higher levels of satisfaction with line | | | | continues | | manager support were reported as we | | • Mental wellbeing | | | addressed needs of people working under | different conditions Key challenges Outcomes of engagement • Opportunities for growth and • We increased direct engagement valuecreation viaourcustomers teams and via ### Our customers • Offering a 24/7 beverage portfolio customersurveys thatmeets the changing preferences Relevant KPIs ofconsumers • Volume and FX-neutral revenue growth Material issues • Pandemic-related trading and • Customer feedback from surveys • Economic impact movementrestrictions • High merchandising standards • Nutrition • Supply and delivery challenges • Cooler coverage of high potential outlets • Packaging and waste management How we engage Principal risks Growth pillars • Key account managers engage with our • Changing retail environment customers at a strategic level • Product quality and food safety • Our business developers continued to make regular visits to outlets Read more on pages 25-29. • We provided targeted support to out-of-home channel customers to reopen businesses once restrictions werelifted 11INTEGRATED ANNUAL REPORT 2021 Key challenges • Activities related to sustainable sourcing • Rising costs of ingredients, labour, and certifications packaging material, energy and water Relevant KPIs ### Our suppliers • Minimising the environmental impact • % of key agricultural ingredients ofwater and energy resources, sustainably certified aswellasemissions • % of our suppliers adopting our Supplier Material issues How we engage Guiding Principles • Climate change • Feedback received through our annual • Sustainable sourcing Principal risks Group Stakeholder Forum • Water stewardship • Plastics and packaging waste • Regular, ongoing interaction with the • Economic impact • Water availability and usage Coca-Cola System’s Central • Commodity costs Growth pillars Procurement Group and our technology • Managing our carbon footprint and commodity suppliers Outcomes of engagement Read more on pages 34-36, 48. • Our long-term work with partners to reduce our water and energy use has also brought efficiencies. This is particularly important given our NetZeroby40 commitment Key challenges • Our support of new collection schemes is • Climate change translating into increased collection rates • Waste from our packaging for packaging waste in many markets ### Our communities • Water conservation • We have committed to NetZeroby40 across the entire value chain • Empowering youth and women Relevant KPIs Material issues How we engage • #YouthEmpowered • Climate change • We engage with customers and partners to understand what skills and training • % absolute emissions reduction • Corporate citizenship young adults need in specific markets • # water stewardship projects in water • Economic impact • Via our #YouthEmpowered sessions we priority locations • Packaging and waste management increase the employability of young people • % primary packaging collected • Water stewardship • We participate actively to support the • # volunteering hours Growth pillars set-up and implementation of new Principal risks packaging collection schemes • Geopolitical and security environment Outcomes of engagement • Plastics and packaging waste • We continued to support frontline efforts • Managing our carbon footprint to tackle the COVID-19 pandemic via • Water availability and usage volunteering and product donations Read more on pages 46-50. ### Emission reductions in our ### supply chain | As part of our efforts to partner with our | Approximately 90% of our Company’s | | --- | --- | | suppliers, we held our first ever supplier | carbon footprint comes from Scope 3 | | sustainability event in 2021. At the event | emissions, which occur in the value chain, | | weprompted our suppliers to establish | linked to our operations, but are generated | | their own science-based emissions targets | from sources beyond our control. Together | | by 2030 and collaborate with us to develop | with the Coca-Cola System, we have so far | | longer-term net zero aspirations with | initiated sustainability partnerships with | | focus on several key packaging and | about 20 critical suppliers, representing | | ingredients partners. Better partnerships | 50% of our Scope 3 emissions. | are crucial to achieve our ambitious NetZeroby40 target. 12 COCA-COLA HBC ### Stakeholder engagement continued Key challenges Outcomes of engagement • Ensuring product supply and safety • We continued to evolve our portfolio • Continuously evolving our products offering to address changing consumer ### Our consumers tomeet consumers’ needs for healthy moments and invested further in hydration, quality, taste, innovation digitaland e‑commerce to meet new andconvenience shopperneeds How we engage Relevant KPIs Material issues • We understand consumers’ needs and • % reduction of calories per 100ml SSD • Nutrition preferences through collecting consumer • # consumer complaints • Product quality insights. While this is also part of Principal risk • Responsible marketing TheCoca‑Cola Company’s role, we gain • Product quality and food safety Growth pillars access to these insights • Consumers also provide feedback on Read more on pages 20-22. social media and via the consumer hotlines Key challenges • To address health and nutrition concerns, • Industry and/or product-specific policies, we continue to add low- or no-sugar drink such as taxes, restrictions or regulations options in every market and provide ### Government • COVID-19-related regulations transparent nutritional information • Environmental policies Relevant KPIs • % absolute emissions reduction Material issues How we engage • Much of our engagement with • % reduction of calories per 100ml SSD • Climate change governments is conducted at an industry • % packaging collected • Nutrition level through trade associations • # water stewardship projects • Packaging and waste management • We partner with local governments • Water stewardship Principal risks totackle waste collection challenges • Product-related taxes and regulatory Growth pillars andwater availability changes Outcomes of engagement • Ethics and compliance • In response to regulations and levies on Read more on pages 22, 47, 49-50. certain types of plastic packaging, we have lightweighted packages and used more sustainable materials Key challenges Relevant KPIs • Increasing focus on ESG • Management access and positive investor • Maintaining focus on long-term perceptions of strategy ### Our shareholders potentialof the Group rather than Principal risks short‑termvolatility • Plastics and packaging waste How we engage • Changing retail environment Material issues • Communication during our Annual • Commodity costs • Corporate governance General Meetings, investor roadshows, • Product-related taxes and Growth pillars press releases and results briefings, regulatorychanges andongoing dialogue with analysts • Foreign exchange fluctuations andinvestors • Managing our carbon footprint Outcomes of engagement • Geopolitical and security environment • Stepped-up consultation efforts and • Suppliers and sustainable sourcing strengthened two-way dialogue between the Company and investors, ensuring Read more on page 101. both good understanding of long-term Company strategy in the markets and thatinvestor concerns are considered indecision‑making 13INTEGRATED ANNUAL REPORT 2021 Key challenges • We increased implementation of • Support for consumers, customers sustainable, ethical practices in our supply andcommunities chain through System-wide collaboration ### The Coca‑Cola • Profitable growth opportunities Relevant KPIs ### Company • Value share in our markets • % reduction of calories per 100ml SSD • Sustainable sourcing • % of key agricultural ingredients Material issues sustainably certified • Nutrition How we engage • Day-to-day interaction as business • Investments in community projects • Responsible marketing partners, joint projects, joint business • Sustainable sourcing Principal risks planning, functional groups on strategic • Corporate citizenship • Suppliers and sustainable sourcing issues and ‘top-to-top’ senior • Strategic stakeholder relationships Growth pillars management forums Outcomes of engagement Read more on pages 8, 22, 27, 35. • Our partnership added to the strength and depth of our 24/7 portfolio, especially thanks to the continued roll-out ofCostaCoffee | Key challenges | | Outcomes of engagement | | --- | --- | --- | | • Climate adaptation, move toward net zero | | • 6% training capacity for our first-time | | | emissions and water and energy use | managers went to NGO leaders in 2021 | ### NGOs • Packaging waste Relevant KPIs • Sustainable sourcing • # partnering NGOs • Partnerships with communities and Material issues Principal risks grassroots organisations • Climate change • Plastics and packaging waste • Diversity and human rights • Corporate citizenship • Managing our carbon footprint • Human rights, diversity and inclusion How we engage • Suppliers and sustainable sourcing • We include NGOs and community • Packaging and waste management • Water availability and usage partners in our leadership development • Water stewardship • Ethics and compliance programmes, offering online training for Growth pillar managing virtual teams and leading in Read more on pages 46-47, 50. times of crisis • We partner with specific NGOs for targeted projects • We engage through our annual Group Stakeholder Forum and our annual materiality assessment, as well as through ad hoc meetings ### Delivering value for ### thecommunities where ### weoperate | Across all markets, we took our commitment | Despite the pandemic, which has limited | | --- | --- | | to create value for wider society seriously, | in-person programmes, we remain on track | | continuing to focus on COVID-19 support, | to support the employability of one million | | disaster relief and our #YouthEmpowered | young people across our markets by 2025. | | programme. For COVID-19, we again | InItaly and Greece we re-purposed | | provided a mixture of cash donations, | #YouthEmpowered tools to address the | | freeproducts and donations of equipment. | needs of the hard-hit hospitality sector and | | Weprovided more than 300 refrigerators, | delivered masterclasses for young people | | for instance, to expand capacity for | aspiring to a HoReCa career. In Czech | | vaccinestorage in Greece. In response | Republic we helped young people from | | toearthquakes, floods and wildfires, | vulnerable backgrounds find high-quality | | wecontributed cash or donated products | jobs, while in Hungary we started training | | to support victims, governments, fire | young people with disabilities. | brigades, and the Red Cross in Croatia, Greece, North Macedonia and Russia. 14 COCA-COLA HBC # Market trends # Adapting to evolving trends ## Market trends ![img-8.jpeg](img-8.jpeg) ### Dynamic retail environment In 2021 we saw an improvement in private consumption, boosting performance across categories. The out-of-home channel recovered from 2020 closures, yet restrictions on its operations were not fully lifted in all countries and were dependent on vaccination rates and COVID-19 case evolution. Online retailers and discounters experienced strong growth again in 2021. ![img-9.jpeg](img-9.jpeg) ### Consumer preferences The COVID-19 pandemic strengthened interest in health and wellness, with people looking not only for organic offerings, but also those with less sugar or fat and for functional products that can enhance immunity. Consumers are getting accustomed to socialising, working or training at home. Many consumers are willing to spend more to replicate out-of-home experiences in their homes, turning to iconic brands they trust. ![img-10.jpeg](img-10.jpeg) ### Digital evolution Trends toward digital channels have further accelerated throughout the pandemic, as consumers adopt faster virtual solutions and technology. The performance of daily tasks online, such as working, getting education or banking, has led consumers to become more comfortable with technology and to appreciate how much it is needed. Online shopping has seen important growth and online food orders expanded, benefiting from periods of restricted activity in the out-of-home channel. ![img-11.jpeg](img-11.jpeg) ### Sustainability In 2021, the COVID-19 pandemic remained the world's biggest challenge. As the world gradually lifted lockdowns and rolled out vaccinations, employee health and safety and community support were high priorities. Climate change mitigation and adaptation, and commitments to cut emissions were in the spotlight of the UN Climate Change Conference in Scotland in November. Consequently, businesses have been announcing ambitious net zero emissions targets while investing in more sustainable packaging solutions. Equality and inclusion have been of increased concern in 2021. As a result, consumers and customers expect governments and businesses to take bolder action. Effective solutions to sustainability challenges, and transparent practices, help strengthen brand reputation, customer loyalty and competitive advantage. ![img-12.jpeg](img-12.jpeg) ### Regulatory environment Policy makers tried to balance the need to restart economies with fiscal gaps created by the ongoing pandemic. The European Commission proposed a number of policies and new mechanisms to achieve its target of drastically reducing net greenhouse gas emissions. At the same time, the Farm-to-Fork strategic framework and the new Code of Conduct for responsible business and marketing practices focus on creating sustainable food systems. Packaging remained on the agenda in the EU, through the transposition of the Single Use Plastic and the revision of the Plastic Packaging and Packaging Waste Directives. INTEGRATED ANNUAL REPORT 2021 15 # How we are responding The COVID-19 pandemic has demonstrated the value of close customer partnerships. The flexibility of our route to market allowed us to actively support our customers so that they could drive more transactions and capture growth opportunities as markets began to reopen, which was particularly valuable for our out-of-home customers. The at-home channel performed strongly during 2021, as drinking occasions at home remained strong even as lockdowns eased. We remained a key partner to our at-home customers, ensuring product availability and adapting our offering. We continued to leverage the trend for out-of-home experiences at home, with our adult sparkling portfolio performing well through 2021, supported by our joint activation of Premium Spirits. Our increasingly broad portfolio of energy brands and innovations supported strong growth. Following the 2020 launch of Costa Coffee in 14 markets, we rolled out to an additional three markets in 2021. We also acquired a stake in Caffè Vergnano, a premium Italian coffee brand which complements our Costa Coffee offering. Our non-sparkling portfolio recovered, boosted by the reopening of hotels, restaurants and cafés as well as a return of on-the-go consumption. Our business-to-business Customer Portal has transformed into an engagement-driven digital platform for businesses, allowing us to more than quadruple digital transactions to 8% of our total transactions in 2021. We have increasingly digitised our route to market in the e-commerce channel, partnering with e-retailers and food delivery platforms to maximise online sales. We also expanded the use of our data, advanced analytics and artificial intelligence capabilities, achieving coverage of advanced analytics solutions across all our largest markets during the year. While unique challenges continued in 2021, protecting our people remained our top priority. We supported both our communities and our customers with numerous relief initiatives, including charitable and product donations. We stayed on track with our Mission 2025 sustainability commitments. We announced our most ambitious sustainability goal to date: a commitment to reduce emissions to net zero across our value chain by 2040. Moreover, we continue to make progress on creating a diverse and inclusive workplace and were ranked 8th of over 11,000 companies assessed globally by the Refinitiv D&I index. Our target to achieve net zero emissions across our entire value chain by 2040 is part of our commitment to create a sustainable food system. Additionally, we continued to progress towards achieving our Mission 2025 goals to help collect the equivalent of 75% of primary packaging, make 100% of our consumer packaging recyclable and achieve a 25% calorie reduction in our sparkling beverage portfolio. As part of the Coca-Cola System in Europe and the European Soft Drinks Association, we are also contributing to the EU's voluntary code of conduct for responsible food businesses. # Delivered through +0.9pp We gained or maintained share in the majority of our markets in the non-alcoholic ready-to-drink (NARTD) category and gained 0.9pp of value share to 27%. +14% The at-home channel continued to grow in 2021 with volumes up 14% in comparison to 2019 and 10% above 2020 volumes. +87% Revenue in the e-commerce channel grew by 87% in 2021 compared with 2020 -24% Absolute carbon emissions in operations were lower by 24% in 2021 compared with 2017 46% In 2021, we recovered 46% of the primary packaging we put in the marketplace # Growth pillar 1 2 1 1 1 2 3 1 2 3 4 5 2 3 16 COCA-COLA HBC ### Our purpose and strategy ## A year of progress towards ## GrowthStory 2025 This vision is grounded in our purpose to provide ### In 2021 we remained clear on our growth for our customers and delight consumers ### visionto be the leading 24/7 beverage bynurturing passionate and empowered people as we ### partner, as well as on the strategy enrich our communities and care for the environment. ### which will getus there. Our purpose is directly linked to our strategy and to thefive growth pillars that guide us as we pursue our objectives and targets. ### Our purpose Our growth pillars ## Leverage our ## 1 We are devoted to ## unique 24/7 portfolio growing every customer and delighting every Read more on pages 18-23. consumer 24/7 ## Win in the ## 2 ## marketplace Read more on pages 24-29. By nurturing passionate ## and empowered teams Fuel growth through ## 3 ofpeople ## competitivenessand investment Read more on pages 32-37. ## Cultivate the potential ## 4 ## ofourpeople Read more on pages 38-43. While enriching our ## communities and caring 5 Earn our licence forthe environment ## to operate Read more on pages 44-51. Our growth mindset values Winning with customers Nurturing our people We are the selling organisation We believe in our people, devoted to providing andhave a passion to develop innovative solutions to create ourselves and others shared value 17INTEGRATED ANNUAL REPORT 2021 By remaining focused on our Growth Story 2025 strategy, we have been able to prioritise the actions andinvestments that are positioning the Company for sustained success. Continued focus on this strategy over the last two years has laid the groundwork for thestrong performance we are now seeing as markets recover from the turbulence of the initial phases ofthepandemic. ### How we are growing Growth Story ### 2025 targets • Offer the best 24/7 beverage portfolio on the planetinpartnership with The Coca-Cola Company andothers partners. ## 5-6% FX-neutral revenue growth per annum, on average • Build unrivalled teams of true partners for our customers, executing with excellence in every channel for prioritised drinking moments • Fast-forward critical capabilities for growth ## 20-40 bps Comparable EBIT margin growth • Transform, innovate and digitalise our business toensure perannum, that weare fit for the future onaverage Employee • Invest in building the best teams in the industry engagement • Develop an inclusive growth culture around our score greater empowered people thanthe high- performingnorm • Be an environmental leader, engage our communities behind water and waste initiatives, and empower youth, Accomplish together with our partners Mission 2025 sustainability commitments Excellence Integrity Learning Performing as one We strive for unparalleled We always do what is right, We listen, have a natural We collaborate with agility performance by amazing not just what is easy, curiosity to learn and tounlock the unique customers with our andare accountable for areempowered to take strength of diverse teams passion and speed theresults smartrisks 18 COCA-COLA HBC Our porfolio is stronger than ever with a true 24/7offering. 19 19INTEGRATED ANNUAL REPORT 2021 ### Growth pillar ## 1 ## Leverage ## ourunique ## 24/7 portfolio | Highlights in 2021 | | Priorities in 2022 | | --- | --- | --- | | • Strong momentum across all | | • Continue to prioritise scalable | | | segments and continued | andprofitable brands as well as | | | expansion to become the leading | products, whilst driving | | | 24/7 beverage partner, creating | disciplinedinnovation | | | shared value with our consumers | • Continue driving excellence | | • Maintained resilience in the | | inexecution to capture the | | | sparkling category by leveraging | growing at-home occasion, | | | low- and no-sugar variants, Adult | whilemaintaining focus behind | | | Sparkling, flavours and different | theout-of-home channels | | | pack formats | • Increase the penetration of | | • Achieved another year of strong | | single-serves and affordable entry | | | double-digit revenue growth | packs helping expand our price/mix | | | inenergy drinks, with continued | • Continue to drive growth in energy | | | new roll-outs and launches | • Continue to grow organically and | | • Rolled out Costa Coffee in | | roll out Costa Coffee and Caffè | | | additional markets, bringing the | Vergnano, building our presence | | | product to 17 markets in total | inone of the most attractive | | • Acquired a stake in Caffè | | beverage categories | Vergnano, a premium coffee brand to complement Costa KPIs Stakeholders Principal risks • FX-neutral revenue • Changing retail Our consumers growth environment • Volume growth Our customers • Product related taxes • FX-neutral revenue andregulatory changes Shareholders percase growth • Strategic stakeholder The Coca-Cola relationships Company 20 COCA-COLA HBC ### Leverage our unique 24/7 portfolio continued Strong momentum across With a new flavour profile that is even closer Percentage of Coca‑Cola HBC revenue to that of Trademark Coke, Coke Zero theportfolio volumes increased by 20.0% during the year We performed strongly, despite a with low- and no-sugar Sparkling up 47.3% challenging backdrop in 2021, with the overall. Fanta and Sprite were also activated COVID-19 pandemic still impacting all our in select markets, and both delivered markets through the year. Our broad and double-digit volume growth. flexible 24/7 portfolio, together with our | expertise in adjusting our pack/price | The Coca-Cola System capitalised on the | | --- | --- | | architecture and our continuous execution | long-awaited UEFA Euro 2020 tournament, | | excellence across channels, once again | with strong activations across our markets | | proved crucial. | that drove both consumer and customer | engagement. Towards the end of 2021 the Over the summer months, we saw a strong Coca-Cola System also launched the new improvement in out-of-home consumption, Sparkling 74% Coffee <1% Real Magic platform and campaign, to bring Hydration 7% Plant based <1% as government measures eased, consumers Juice 4% Premium Spirits to life a new marketing platform aimed at started travelling, vaccination rates RTD Tea 3% and flavoured engaging with the Gen-Z audience. Real increased, and hotels, restaurants and cafés Energy 6% alcoholic Magic was a core part of marketing activities gradually reopened across most of our beverages 3% in December, featuring Trademark Coke to Snacks <2% markets. While leveraging the recovery in re-connect with our consumers. the out-of-home channel, we maintained | our focus on capturing at-home occasions. | Beyond the core Coke brand products, | | --- | --- | | The breadth and relevance of our portfolio, | wecontinued to build our adult sparkling | | brand strength and market leadership | business, providing a variety of sophisticated | | boosted our Group market share in excess | flavours for straight consumption and mixing. | | of 2020 and 2019 levels. | Socialising at home remained very relevant | in 2021 and we continued to leverage this With the pandemic still a significant issue trend with our joint activation of Premium across the globe and inflationary pressures Spirits. As hotels, restaurants and cafés growing, we saw consumer focus around reopened, we supported our customers’ both premium occasions and affordability. recovery, building on the important occasion Our vast portfolio of offerings, propositions of socialising away from home. and initiatives provided tools to address both issues. We expect to continue to leverage these market trends in the years to come. Loosening of restrictions boosts still portfolio Sparkling growth driven by After a challenging environment in 2020, ourstill portfolio rebounded significantly strategic focus areas in2021 as hotels, restaurants and cafés Our sparkling portfolio remained the key reopened and on-the-go consumption focus across our markets in 2021. The main occasions returned. growth and premiumisation drivers continued | to be Trademark Coke and Adult Sparkling, | The performance of water significantly | | --- | --- | | which together with our flavoured sparkling | improved, helped by greater sales of | | portfolio, provided consumers with a variety | single-serve products, particularly through | | of choices across the affordable and | the summer months. In 2021 we continued | | premium spectrum. | to invest in a targeted way behind Aquarius | functional water, meeting the growing Our ongoing efforts to provide healthier demand for hydration enhanced with options across our portfolio also helped minerals. We continued to introduce ensure the resilience of Sparkling, which was sustainability initiatives in water, rolling out one of the best performing categories recycled plastic (rPET) bottles in the Czech during the year. The strength of our portfolio Republic and further investing in dedicated and the performance of well-loved brands marketing campaigns. like Coke, supported by unrivalled execution, | | allowed us to increase market share by 10 | In Juice, we repositioned Cappy, | | --- | --- | --- | | UN Sustainable Development Goals | basis points in Sparkling. Our 2021 relaunch | rejuvenating the visual identity towards a | | We serve our consumers with abroad range | of Coke Zero, coupled with the launch of the | | more premium brand positioning and further ofhigh-quality products. In doing so, we new Coke Icon visual identity, with strong developed the Cappy Lemonades range to createvalue by contributing toglobal goals activations including sampling, demonstrated drive profitable growth in our juice business. forgoodhealth and wellbeing, innovation, our commitment to adjust products to The strength of our portfolio, combined responsibleproduction and consumption aswellaspartnerships. provide consumers with healthier options. withthe new visual identity and excellent execution in store, allowed us to increase value share by 60 bps. 21INTEGRATED ANNUAL REPORT 2021 | In tea, we expanded the no-sugar portfolio | The category accounted for 6.4% of our | We recruited 4,000 out-of-home customers | | --- | --- | --- | | for FUZETEA and launched a new label | Group revenues in 2021, up 100 basis points. | during the year, ahead of our plans, with a | | design across markets. | | strong pipeline for 2022. | With new packs and flavours for existing | AdeZ, our plant-based, sugar-free beverage | brands, the expansion of newly introduced | In 2021 we also acquired a 30% stake in | | --- | --- | --- | | line, has continued to perform well in Italy, | brands, impactful activations and increased | Caffè Vergnano, a premium Italian coffee | | animportant market for our plant‑based | product availability in the market, we | brand, to complement our existing Costa | | business, delivering double-digit revenue | increased value share for our energy brands | Coffee proposition. The combination of the | | growth in 2021 and value share growth of | by 40 basis points. | two coffee businesses gives us a total coffee | | 30bps. The recently launched multi-seed | | portfolio, which addresses a broad range of | We have an increasingly broad portfolio of variants made progress, increasing their consumer and customer needs in a brands and our strong partnership with volume contribution from 9% to 12% fast-growing category. We started Monster supports our continued growth. To acrossmarkets. distributing Caffè Vergnano products in develop the category further into adjacent selected markets at the end of 2021 and we segments, after a successful launch in 2019 Products for every occasion will continue rolling it out during 2022. in Ireland we launched Reign, a performance | anddemographic | energy beverage with caffeine and | As part of our fully integrated 24/7 strategy, | | --- | --- | --- | | Energy is one of the fastest growing | electrolytes, in Poland in 2021. | we sell premium spirits in 25 of our markets, | | non-alcoholic, ready-to-drink (NARTD) | | working closely with partners to distribute | The coffee category is important to our categories across our markets, driven by world class brands like Jack Daniels, Aperol, efforts to become the leading 24/7 both new demographics and higher per Macallan and Famous Grouse. Our focus beverage partner. We launched Costa capita consumption. Our broad portfolio onmixability provides us with strong Coffee in three additional markets in 2021, continues to evolve, and we have been cross-selling opportunities with our core bringing the product to 17 markets in all, and agileat responding to affordability and beverage portfolio and creates a compelling we continued to see market share growth. premiumisation trends that have emerged offering for our hotel, restaurant and café While the initial 2020 Costa launch primarily through the COVID-19 pandemic. customers, positioning us as a preferred targeted the at-home channel, we expanded one-stop-shopping partner. | Energy was one of our best performing | our efforts in 2021 as restaurants, cafés and | | | --- | --- | --- | | categories during the year and delivered | offices reopened. Almost all the coffee | In 2021 we enjoyed strong double-digit | | asixth consecutive year of double‑digit | machines we placed with out-of-home | growth in Premium Spirits, due to the | | volume growth. Revenue growth was 42% | customers were digitally enabled, allowing us | continued expansion of our portfolio | | for the total energy portfolio, driven by clear | to share data and insights with customers. | offerings in the markets we operate in, our | | strategic priorities for all markets. Our revenue | | core focus on premium and super premium | | growth came from existing products, as well | | products, and rigorous execution around the | | as product innovations and brand launches | | consumer trend for cocktails. We have made | | into new markets during the year. | | sure we are well set up for the future, further | developing targeted capabilities through our Sales Academy. In 2021, we also continued to pursue a targeted market approach with our hard seltzer proposition, Topo Chico, consistent with our objective to invest further in this category. Topo Chico was rolled out in Switzerland, where distribution was prioritised in out-of-home channels and online. Growing responsibly by delivering on our commitments We are advancing our business strategy tobecome a total beverage company by givingpeople more of the drinks they want. Consumers’ tastes and preferences continue to evolve, and they are increasingly conscious of their calorie and sugar intake while still wanting more choice. 22 COCA-COLA HBC ## Leverage our unique 24/7 portfolio *continued* An important aspect of our strategy includes changing recipes to reduce added sugar, promoting low- and no-calorie beverage options and making smaller packages more available to enable portion control. The Guideline Daily Amount labels on our packages provide at-a-glance information on calories, as well as sugar and all key nutrients. We support the current recommendations of leading health authorities, including WHO, that individuals should not consume more than 10% of their total calories from added sugar. We are reducing added sugar in several products, including Sprite and Fanta, using our strength in innovation to meet our consumers' evolving needs. As part of our Mission 2025 sustainability targets, we have committed to reduce calories per 100ml of sparkling soft drinks by 25% between 2015 and 2025 across all our markets. By the end of 2021, we had achieved a 15% reduction. Through these efforts, we are contributing to the European Soft Drinks Association's (UNESDA's) target to reduce added sugar in beverages by 10% by 2025 from a 2019 baseline. We are committed to making the healthier choice the easy choice for consumers, a commitment that spans across all our business activities. We seek to achieve this by delivering on our commitments, adhering to The Coca-Cola Company's Global Responsible Marketing and School Beverage Policies and UNESDA's pledges. We commit to not market directly to children under 13 and we do not offer any soft drinks in primary schools. In the EU and Switzerland, we offer only no- and low-calorie beverages in secondary schools. Through UNESDA and the Coca-Cola System in Europe we contribute to the European Commission's new code of conduct in support of a sustainable food system. ![img-13.jpeg](img-13.jpeg) ### Managing freshness, quality and food waste Throughout the COVID-19 pandemic, we maintained supply and continued to deliver the highest quality beverages to our customers and consumers. We increased investment in the capabilities of our employees in more innovative ways, while reinforcing the basics. We worked closely with our trusted suppliers of key ingredients and packaging materials to overcome unexpected issues, with only two critical non-compliances in the year. These were both related to our packaging suppliers, resulting in a product recall in Italy and a product withdrawn from the market in Romania. As the pandemic continued to disrupt business activity, we kept product age monitoring as a hybrid model for 2021. Across all operations we used warehouse age measures, which provide us with all the relevant freshness information for products leaving our warehouses. This was combined with regular product age monitoring during storage and transportation to ensure that product age in the market is below the established shelf-life specifications. Despite accelerated changes in consumer behaviour and preferences, in 2021 we achieved a 22.4% reduction in consumer complaints compared with 2020. We will continue with our efforts to reach zero complaints. We strive to minimise food loss and food waste in our operations, focusing on all parts of our value chain. Preventing food loss helps us preserve water and other natural resources, avoid related carbon emissions, and mitigate the related social and economic effects in agriculture. At our manufacturing sites we have targets for production yield, and in our markets we have targets for the age of finished beverage products in order to minimise the number of products at risk of expiration. The trend of expired products was unchanged relative to 2020 at 0.65% in carbonated soft drinks and 0.60% in juices, related to a shift in consumption habits through the pandemic. Our food loss from finished beverages was 0.14% in 2021, compared with 0.23% in 2020 and 0.17% in 2019. The higher level in 2020 reflected product expirations during out-of-home channel lockdowns, while reopenings in 2021, as well as our continuous efforts, helped us stabilise food loss in 2021. ![img-14.jpeg](img-14.jpeg) 23INTEGRATED ANNUAL REPORT 2021 23 ## Future‑focused ## portfolio Mihaela Hoffman Coffee & Premium Spirits Business Director,Romania Positioning our portfolio Coffee is a focus area we have expanded ### “The coffee category is into in the last few years. Costa Coffee forthefuture ### increasingly important in isnow in 17 markets, and our aim is to Our portfolio of brands and categories has ### Romania. We are excited reachall our markets by 2023. Our recent shifted in the last five years, and is likely to ### towelcome Caffè Vergnano acquisition of the premium Caffè Vergnano shift further in the future. We are focused brand allows us to focus on higher-end ### this year and will continue to on making sure that our 24/7 beverage segments of the coffee category as well, portfolio is relevant to every occasion ### create special experiences complementing our Costa proposition. atany time ofthe day – whether that’s ### for our consumers.” Wehave significant ambitions to increase amorning coffee on the go, a lunchtime our presence in coffee, supported by sparkling beverage or an evening cocktail. continuous investment in our capabilities, While our core sparkling category still such as connected coffee machines makes up a significant portion of our andbigdata analytics, to better serve portfolio, as we look to capture more ourcustomers. consumption occasions we have increased focus on areas such as Adult Sparkling, Energy, Coffee, targeted Still propositions and Premium Spirits. 24 COCA-COLA HBC We know that our success is dependent on the success of our customers. 25INTEGRATED ANNUAL REPORT 2021 ### Growth pillar ## 2 ## Win in the ## marketplace | Highlights in 2021 | | Priorities in 2022 | | --- | --- | --- | | • Supported the reopening | | • Continue to execute our revenue | | | ofhotels, restaurants and cafés | growth management through | | • Strengthened our relationship | | bothprice and mix acceleration, | | | withe-retailers and developed our | while addressing consumer | | | partnerships with new channels, | needsfor affordability as well as | | | achieving higher market | premiumisation | | | shareonline | • Advance our big data and | | • Accelerated the use of big data, | | advanced analytics capabilities to | | | advanced analytics and | further enhance our segmented | | | newtechnology | executionmodel | | • Introduced the new Sales | | • Continue to invest to improve | | | Academy across all our markets, | ourdigital commerce abilities | | | to drive our salesforce’s capability | andrespond to rapid growth | | | to deliver improved customer | • Improve our coverage of dynamic | | | service, performance and execution | route-to-market solutions | | • Deployed image recognition | | acrossmarkets, supported by the | | | technology to five new markets | deployment of image recognition | | | andincreased our connected | inall markets and an acceleration | | | cooler coverage by +3pp | inthe increase of coverage | inconnected coolers KPIs Stakeholders Principal risks • FX-neutral revenue • Changing retail Our consumers growth environment • Volume growth Our customers • Quality • FX-neutral revenue • Geopolitical and security Shareholders percase growth environment The Coca-Cola • Cyber incidents Company 26 COCA-COLA HBC ### Win in the marketplace continued Excellence in execution We know that our success is dependent on the success of our customers. Throughout the global pandemic, we have prioritised safety and customer service, while avoiding supply disruptions. We stood by out-of- home customers as restrictions disrupted their operations and helped them reopen as restrictions eased. The COVID-19 pandemic demonstrated the value of our customer partnerships, while underlining the need tocontinue to further develop our core commercial capabilities to help us to address new and evolving consumer occasions and ways of shopping. Accelerating our critical growth capabilities isa key driver of our Growth Story 2025 strategy. The key capabilities we are focusing on are big data and advanced analytics, value-led revenue growth management, tech-enabled route to market, and customer-centric key account management. Our digital transformation is accelerating within the business and is fundamental to allthese capabilities, enabling us to better understand the real and changing needs of As the hotel, restaurant and café (HoReCa) Segmented execution has produced our customers and consumers, drive rapid channel began to reopen, we introduced promising results across our largest markets revenue recovery in a profitable manner and ourHoReCa for tomorrow (H4T) framework in 2021, including volume increases and anticipate or react to new challenges faster to support channel acceleration. Through improved outlet prioritisation for new and smarter than our competition. | | the H4T framework we focused on being a | product launches. For the prioritisation | | --- | --- | --- | | | full-service partner to our customers, | ofour Costa Coffee roll‑out in Bulgaria, | | Generating value for our customers | increasing the frequency of sales visits and | Hungary, Poland and Russia, we analysed a | | The at-home channel performed strongly | helping to upgrade the HoReCa experience | vast range of data, including demographics | | during 2021, as drinking occasions at home | through both portfolio premiumisation and | and traffic flow. In Bulgaria, for example, | | continued even as out-of-home channels | innovations. We are providing upskilling | wetargeted locations with proximity to city | | reopened. We remained a key partner to | forcustomers and continuing to build our | parks and those with outdoor seating areas. | | ourat‑home customers, ensuring product | internal capabilities to support the channel. | | The second priority is demand forecasting. availability and adapting our offering to focus Our restart programmes took place through We are driving operational excellence on capturing growth opportunities. With one Q2 across all our markets, helping hotels, through machine learning, improving our large international customer in Italy, we jointly restaurants and cafés restart their business forecasting for short- and long-term launched an on-shelf availability project to growth by addressing their specific needs. demand in our markets. This streamlines improve the replenishment process, which inventory management and prevents isnow being rolled out further. We have Big data and advanced analytics out-of-stock incidents. alsobeen collaborating with a key retailer in To improve insight and decision-making, we Poland to implement a Costa Coffee Corner Thirdly, we are transforming our promotion use data and analytics capabilities to identify in their stores. This success is now being management with our algorithms providing and capture value-creation opportunities, introduced in additional markets. aholistic measurement of the return on particularly for top-line acceleration and cost investment for each promotion, including Our out-of-home customers have had a optimisation. We are now able to analyse the negative impact of forward buying, more mixed year, experiencing good data at a granular level, allowing us to competitor promotions and cross-brand recovery but not yet back to 2019 levels in implement focused initiatives that generate cannibalisation. Finally, we are using our data allmarkets. There were lockdowns across incremental value in targeted areas of the to help improve our retention efforts for many countries in Q1, followed by a strong business. We expanded the use of these business developers, as well as to understand rebound in the summer. In Q4, however, capabilities and achieved coverage of drivers of successful performance. | restrictions resumed in certain markets. | advanced analytics solutions across all our | | | --- | --- | --- | | Wehave stood by our out‑of‑home | largest markets in 2021. | To further scale our capabilities, we are | | customers’ sides throughout the crisis, | | combining a number of data sets to develop | There are four priority areas we have been providing them with consumer insights, a 360-degree view of each of our customers, focusing on. The first, segmented execution, targeted programmes and practical support while also maintaining strong data is where we use our capabilities to identify as markets reopened. governance. We have introduced leading customer needs in different locations and data quality and governance tools to maintain different types of outlets to better target the quality of our priority datasets, treating product assortment and marketing activities. data as a strategic asset. 27INTEGRATED ANNUAL REPORT 2021 | Revenue growth management | Optimising our digitally enabled | | --- | --- | | With The Coca-Cola Company, we have | route to market | | builta revenue growth management (RGM) | Our route-to-market capabilities showcase | | framework that helps us maximise both | our wide beverage portfolio in every outlet, | | thenumber and value of our transactions, | increasingly assisted by technology. In a | | supporting profitable top-line growth. | challenging year, our agile operating model, | | Wedeliver this by improving mix across | built through investment over several years, | | different levers, as well as through pricing | enabled us to react quickly to the changing | | and increasing the return on investment on | environment. We delivered impressive | | our promotions. With these efforts, we help | volume growth compared with 2019, even | | our customers meet consumer demand for | with most of our markets operating under | UN Sustainable Development Goals affordability as well as premiumisation. restrictions for several months of the year As we build our business by helping our and out-of-home visits much lower. customers to grow and thrive, we make In 2021 we made progress with our smaller substantial contributions to the achievement Theflexibility of our route to market allowed multi-serve entry packs, which allowed us of the Sustainable Development Goals related us to dynamically re-allocate our sales force, tocompete at attractive price points for the to ending poverty, decent work, sustainable maximising opportunities in a changing communities, responsible production, justice consumer and grow transactions in smaller marketplace. We actively supported our and strong institutions, aswellaspartnerships. baskets in a margin-accretive way. Sales of customers so that they could drive the multi-serve entry pack format grew by moretransactions and capture growth 16% in the year, driven by ongoing strong opportunities as markets began to reopen. performance in Russia, Poland and Italy and the introduction of smaller packs in Hungary, Improvements made to our route to market, Ireland and Czech Republic. particularly through increased use of digital and data capabilities, are allowing for a more We also provide our customers with granular segmentation of our customer affordable options through our promotion base, more targeted services and stronger strategy. Advanced analytics are helping us execution. As explained in the digitalisation to quantify the incremental benefit from section on page 30, we further incorporated promotions at the customer and outlet level. digital tools into our route to market, Premiumisation strategies have helped increasing our share of digital orders through ussustain the increase in at‑home our business-to-business platforms and consumption we saw during the first phases increasing coverage of our Customer Portal of the pandemic as consumers replicated across our markets. out-of-home experiences at home. Wedrove greater sales of multi‑pack single-serves, and this helped us to improve our single-serve mix in the at-home channel, with single-serve volumes growing 16% in2021, 19% above 2019 levels. Another driver of premiumisation is the growth of glass packages. We saw a good performance of our 1L returnable glass bottles in Austria, as well as sustained double-digit growth of 330ml glass packs inRomania. Pricing is another critical lever of our RGM strategy. In 2021, we implemented price increases in 95% of our markets. To support these pricing moves and make the best decisions, we analyse data on elasticities per brand, pack and pack type. 28 COCA-COLA HBC ### Win in the marketplace continued | With the reopening of our markets, we | After a successful pilot in 2020, we launched | When a customer raises an issue, we target | | --- | --- | --- | | worked to reinforce our leadership through | the Sales Academy in all our markets in 2021. | a 48-hour response, listening carefully and | | increased market execution in displays and | The Sales Academy has been developed as | improving their experience swiftly. | | the placement of connected coolers. On top | a transformative digital learning approach to | | We launched CustomerGauge, a new digitally of this we have enhanced our execution help build our teams’ capabilities on the job, enabled customer experience feedback capabilities by the expansion of image allowing each country to have flexibility approach, across all our markets in 2021. recognition from three countries to eight. tofocus on the capabilities that are most Weinitiated a faster and simpler way of relevant to their market. Feedback from To support our business growth and listening to our customers more frequently, ourpilot markets has been strong, with our single-serve mix opportunities, we and we enhanced our ability to capture more customers in Russia appreciating that our continued to invest in new coolers, reaching data and actionable insights to drive revenue sales force works collaboratively to drive 88% coverage of our top customer outlets, growth. This is a key example of the digital better operational performance and offer up 3pp compared to last year. We now have transformation Coca‑Cola HBC is undergoing solutions to drive sales. a total of 1.4 million coolers on customer in every aspect of the business. We expect premises. Approaching half of these, 44%, CustomerGauge feedback to lead to more Evolving our customer satisfaction | have online connections, helping us drive the | | learnings and further improvement in 2022. | | --- | --- | --- | | efficiency of our assets and enhance our | approach | | | sales teams’ productivity. | A key learning from 2020 and the COVID-19 | | pandemic was that being close to our customers is the most important way to Driving stronger capabilities across winin the market. We were able to make our salesforce significant advances through 2020 with our To deliver our strategy, our people need customer experience and brought in theright tools to address customer needs. additional improvements in 2021. Thiswas the thinking behind the | establishment of our Sales Academy in | To remain competitive, we ensure that | | --- | --- | | 2020, to build unmatched sales teams that | welisten and respond to every customer. | | constantly strive to improve our service and | In2021 we made step changes to empower | | drive value with and for all our customers. | our salespeople to drive customer-centric | behaviours and ‘close the loop’ to resolve issues immediately. 29INTEGRATED ANNUAL REPORT 2021 ## Future‑focused ## route to market Anton Salov Business Developer, Russia Digitalisation is the focus within promotions and marketing activities, ### “Our upgraded Customer whichtranslates to higher revenues our route to market ### Portal helps me to spend andcustomer satisfaction. Our route to market is increasingly digitally ### more time working on enabled, and the COVID-19 pandemic Russia is leading the way in digitalisation ### customer and category provided an additional boost to this trend. and e-commerce for Coca-Cola HBC and ### development. Our platform Our business-to-business Customer Portal now sees 32% of all orders come through was relaunched in 2020 and transformed the Customer Portal, the highest level ### really helps uslead the way from a functional order-taking platform to across our markets. In the coming years ### indigitalisation in Russia.” an engagement-driven digital experience wesee further opportunity to improve for our customers. The improvement functionality, deepen our customer reach, intheCustomer Portal user experience expand to all our markets and further helpsourcustomers to be promptly increase business-to-business notified on portfolio expansion, ongoing digitaltransactions. 30 COCA-COLA HBC ### Digitalisation across Coca‑Cola HBC ## Enhancing connections ## and accelerating growth ## through data and ## digitalisation ### Investments in data and digital capabilities have consistently Route to consumer ### been prioritised across the Group because we know they are While beverages are an attractive product for consumers to buy online given their ### creating real opportunities for our business. We are benefiting bulk, the category is still relatively early in ### from more targeted sales strategies, access to e-commerce this transition, particularly when compared ### channel growth, improved demand forecasting and even to other consumer categories. This creates asignificant longer-term opportunity to ### improved understanding of what is needed to increase capture growth in this channel. We are ### employee retention. partnering with e-retailers and our existing brick-and-click customers to increase our digital shelf space and visibility as well as direct shopper engagement. The emergence of food delivery platforms has created a new growth opportunity. ### Route to customer ## Investing in digital These platforms, which deliver restaurant Our business-to-business Customer Portal ortake-away food directly to consumers’ ## commerce has been transformed from an order-taking homes, grew rapidly during the pandemic system to an engagement-driven, digital and allowed the hotel, restaurant and café We have been investing in and developing experience for business owners who channel to continue to operate even when asuite of digital commerce platforms and wantto maximise growth efficiently. they were not able to open their doors. solutions to serve the growing numbers Afterintroducing our customer portal to Wehave been working to increase the ofconsumers and customers choosing 22of our markets in2020, we increased presence of our products on these toshop online, a trend that has picked engagement through2021, increasing the platformsand to increase the rate at which upsubstantially since the start of the number of customersreached through our consumerspurchase one of our beverages pandemic. Throughout 2021, we continued platform. This investment has helped us in combination with their meal. to refine our digital commerce strategy, achieve rapid growth in online ordering, and investedcapital and management Coca-Cola HBC has operated in the with the Customer Portal’s share of total attention inthisarea to capture the direct-to-consumer channel in Switzerland, orders quadrupling in 2021 to 8%. significant growthopportunity. one of our larger markets, for many years We have also been investing behind several with Qwell. While the channel is still a small When customers order online, it streamlines other business-to-business opportunities part of our business, we continue to learn processes, freeing up our business tobetter serve our customers, creating alot which is allowing us to understand developers to help our customers develop platforms where we can really leverage our whatdrives success and identify potential their growth opportunities in the beverage existing physical route to market. WABI2B, goodideas. category. It also has the potential to open for example, is a one-stop-shop for our portfolio to large numbers of smaller traditional trade and hotels, restaurants outlets which may not have been economic and cafés to buy products from us or from for business developers to serve. ## 8% other consumer products groups. In 2021 Percentage of transactions through we launched WABI2B in Nigeria and Russia. Customer Portal, our main B2B platform ## 87% Revenue growth from e-retail in 2021 31INTEGRATED ANNUAL REPORT 2021 ## Understanding our ## opportunities better ## with data Big data and advanced analytics are already creating real value across a range of use cases and have the potential to do much more as we continue to develop this criticalcapability. We use data and analytics to identify and capture value-creation opportunities, particularly for top-line acceleration and cost optimisation, and to improve our service and operations across all functions. We are now able to analyse data at a granular level, allowing us to make decisions and implement focused initiatives that generate incremental value in targeted areas of the business. Our data capabilities are even being used to gain insights to support the performance and retention ofnew businessdevelopers. In 2021, we achieved our aim to expand and equipment downtime. In our ## State-of-the-art ouruse of big data, advanced analytics warehouses, we have introduced andartificial intelligence across our augmented reality headsets to speed ## manufacturing largestmarkets. orderpacking and reduce error rates. ## andlogistics Digital transformation in our supply chain | To optimise our supply chain and finance | isalso improving productivity and reducing | | --- | --- | | functions, we have invested in a range | costs. In 2021, we implemented an SAP | | oftechnologies. | e-procurement solution in many of our | markets, with further roll-out planned In our manufacturing plants, we have for2022. improved efficiency by investing in new, | automated production lines. These reduce | Our successful implementation of SAP’s | | --- | --- | | idle time, thus expanding our capacity while | newest enterprise application suite, | | reducing costs. In 2021, we introduced | S/4HANA, in 2021 is simplifying processes | | anew digital manufacturing platform with | and increasing productivity across our | | amonitoring system in seven markets. | commercial, supply chain and finance | | Thishas given us better insight into energy | functions. This technology provides a solid | | consumption and expanded our use of | foundation for future technological tools by | | predictive maintenance, reducing costs | increasing our ability to extract and use data. | It provides a great onboarding experience ## A connected culture for new business developers as well as | As thousands of our people began working | in-depth training in specific product | | --- | --- | | remotely for the first time in 2020, we | categories and channels, including premium | | accelerated our investment in new digital | spirits and hotels, restaurants and cafés. | tools for learning and connection. Throughout the onboarding process, new | Our online Sales Academy, launched in | business developers are guided by our new | | --- | --- | | 2020 and rolled out across our markets | ONBOARD app. We have also introduced | | in2021, offers development tools for all | an app for continuous performance | | layers of our sales force. | conversations, embedding continuous | feedback throughout our business. While the COVID-19 pandemic reduced opportunities to meet in person, new digital tools keep our people connected and engaged. At our virtual leadership conference in 2021, participants shared personal stories and inspiration. Digital channels are also helping to drive the visibility and attractiveness of our employer brand. Over 550 of our employees post regularly on social media channels, and we encourage social media conversations around our products and specific events. 32 COCA-COLA HBC New technology is driving dramatic improvements in accuracy and productivity, and cost savings. 33INTEGRATED ANNUAL REPORT 2021 ### Growth pillar ## 3 ## Fuel growth ## through ## competitiveness ## and investment | Highlights in 2021 | | Priorities in 2022 | | --- | --- | --- | | • Supply chain costs as % of net | | • Continued focus and investment | | | sales revenue decreased by | indigital commerce, underpinned | | | 1.4basis points in comparison | by next generation digital | | | toprioryear | marketingcapabilities | | • Further implementation of | | • Smooth integration of IT systems | | | advanced analytics supported | for Egypt | | | roll-out of segmented execution | • Introduce digital solutions for | | | toall markets | supply chain and demand planning | | • Automation and digitalisation | | • Reduce the use of PET, | | | ofmanufacturing process | accelerating package-less and | | • Successful implementation | | refillable options and eliminating | | | ofSAP’s S/4HANA for | plastic from secondary packaging | | | greaterproductivity | • Expand predictive maintenance | KPIs Stakeholders Principal risks • OpEx as % of NSR • Plastics and packaging Our suppliers • CapEx as % of NSR waste Shareholders • Changing retail • Comparable EBIT margin environment • ROIC • Cyber incidents • Foreign exchange fluctuations • Water availability • Managing our carbon footprint • Suppliers and sustainable sourcing 34 COCA-COLA HBC ### Fuel growth through competitiveness and investment continued ### We demonstrated our ### resilience and adaptability ### during the year, maintaining ### production continuity ### andavoiding any supply ### interruptions for our customers ### while continuing to make health ### and safety our top priority. This required us to embrace innovation, dataand sophisticated digital technologies, while investing in our people to develop newcapabilities. As trading levels rebounded, so too did direct marketing expenses. However, with fewer physical meetings and less travel, some operational cost reductions were maintained. New technology is driving dramatic improvements in accuracy and maintenance costs, limiting equipment onpage 30. Technology is also helping productivity, and cost savings. downtime. In 2022, we will expand the usimprove market execution. We fully newmaintenance approaches to five activated our in-store image recognition Optimising infrastructure additionalmarkets. technology in seven business units, more By expanding and optimising our production than doubling the number of outlets covered Across the business, our optimisation and warehouses, we support our expanded to 350,000. We are processing over two efforts have resulted in a 30% reduction in 24/7 portfolio and improve our ability to million product execution images every plants across our territory, from 80 in 2008 serve our customers and address changing month with 98% accuracy, freeing up sales to 56 at the end of 2021. At the same time, consumer needs and preferences. people to spend more time with customers we increased our production lines per plant We continued our investments to increase and improving revenue per outlet. by 44% which allowed us to maintain our the capacity of our plants by installing six capacity and create more efficient and New digital tools are improving operational new production lines in Nigeria, Ukraine and flexible facilities. To improve our service productivity and helping us serve customers Romania to address increasing demand and offering while reducing our costs, we have cost-effectively with better monitoring avoid out-of-stock issues. Six warehouses optimised our logistics network by reducing ofinsights and data. We introduced a range were constructed or renovated in 2021, our distribution centres by 66% and our of solutions for digital transformation across adding capacity and increasing efficiency. warehouses by 65% over the same time many different business areas during the Our warehouse projects support better period. These structural improvements year, including planning, logistics and customer service, cost efficiencies and support a lean and resilient operating model. procurement. Automation, for example volume growth in five markets, ofquality and safety, has helped us be includingNigeria. Leveraging technology and big data moreflexible to meet fast‑changing We also increased our investments in Our continued investment in technology customerneeds. innovative KeelClip™ equipment, adding hassupported our business resilience We made progress digitising our installations in Romania, Italy, Greece and throughout the COVID-19 pandemic. procurement, implementing the SAP Ariba Hungary. KeelClip™ is a minimalist Oursuccessful implementation of SAP’s e-procurement tool in 12 markets in 2021, paperboard packaging solution which newest enterprise application suite, with plans to expand this to all our markets in replaces plastic packaging for multi-packs, S/4HANA, in 2021 is already increasing 2022. This supports greater standardisation helping us achieve our sustainability productivity across our Group while providing of our procurement activities. We are also objectives. By improving our manufacturing a solid foundation for the deployment of piloting the integration of SAP Ariba with efficiency with additional investment in additional technological tools. The S/4HANA third-party assessments of financial, automated production lines, we reduced idle implementation brought better support to environmental and social risk. time and expanded our production capacity business needs, and provides new insights We are also reducing costs and streamlining by nearly 3% while achieving cost savings. by improving access to data in our systems. processes with new digital platforms for This is helping us serve customers in a more To streamline maintenance in our internal purchases, such as our buying segmented way and streamline order taking, production facilities, we introduced a digital platform for trade marketing activities. helping us provide better service to our manufacturing platform in several markets in Launched in 16 markets in 2021, this customers faster. 2021. This platform allows better monitoring improves our marketing activities while of production, gives higher visibility of energy We continued to digitally transform our generating economies of scale to drive consumption and allows us to use a more route-to-market capabilities, achieving down costs. flexible, predictive maintenance approach. significant increases in sales through our Shifting to predictive maintenance has enhanced Customer Portal. See the helped us to achieve better control of our Digitalisation section for more details 35INTEGRATED ANNUAL REPORT 2021 | As our business generates more data, we | Agriculture (PSA). These principles are | Packaging and transport | | --- | --- | --- | | are also getting better at deriving value from | aligned with leading third-party sustainable | Improving the sustainability of our packaging | | this important asset. We are establishing | farming standards and assurance schemes | is one of our Mission 2025 sustainability | | along‑term data strategy and vision, | such as the Farm Sustainability Assessment | objectives. In 2020, we installed new | | implementing a data governance process, | of the Sustainable Agriculture Initiative | in-house PET recycling and preform | | democratising data access through a new | Platform (SAI‑FSA), Bonsucro, Fairtrade | manufacturing technology at our plant in | | Azure cloud enterprise data warehouse | International and Rainforest Alliance. | Krakow, with the objective of improving our | | andenhancing data insights with cross‑ | | access to food grade, recycled PET (rPET). | By working to implement practices that align functional management reporting. Business In 2021 we commenced the installation with the PSA, such as efficient farm data used with purchased data helps us ofadditional in‑house recycling technology management practices, we manage supply leverage artificial intelligence to improve in Italy and plan for an expansion to Romania and reputational risks while delivering value segmented execution, demand forecasting in2022. for all stakeholders, including farm workers. and product performance. By rolling out Along with The Coca-Cola Company, we In Switzerland, we have received approval segmented execution powered by big data issued a PSA supplier guide as a reference to touse green rPET for our sparkling and and advanced analytics to all of our markets support implementation of sustainable, water portfolio together with additional rPET during 2021, we achieved incremental ethical practices. bottle lightweight activities. revenue and business growth. To ensure our principles are being upheld, This will close the Swiss recycling loop for we use external third-party verification green bottles sold to market, increase the Improving our impact whileencouraging our suppliers to follow availability of rPET feedstock and support In 2021, we started to track our business sustainable practices to maximise value lowering recycling costs. These bottles will performance based on our newly validated andcontain their costs. Our 2025 target be in the market in Q1 2022. 2030 science-based carbon emission foringredient sourcing is to achieve 100% targets and, looking beyond 2030, As new single-use plastic regulations came certification of our key agricultural ingredients committed to achieve net zero across our into effect in the second half of 2021 in the against the Principles for Sustainable value chain by 2040. In support of these EU, we are now supplying paper straws. Agriculture. Due to accelerating demand goals, we continued to increase our use Weare also investigating options to replace andlimited availability of sugar crops, we ofrenewable and clean energy and invest plastic lids on our paper cups. were forced to turn to new suppliers in inenergy reduction and decarbonisation 2021.Thisdisruption meant 80% of key We had success piloting a new stretch film projects across our markets. In Nigeria, agricultural ingredients purchased in 2021 used on pallets in Poland in 2021, reducing weinstalled additional solar panels at four were certified, a drop from 82% in 2020. plastic used on pallets by 40% while ofour bottling plants. These installations are Weare working to stabilise supply and improving product stability. We plan to connected to the local electricity grid and | | | introduceimproved practices with | implement this on a larger scale during 2022. | | --- | --- | --- | --- | | provided 1,500 tonnes of CO | 2 emissions | | | | | | newsuppliers. | We also made progress with cardboard | savings in 2021. In Cyprus and at 10 of our packaging, incorporating more than 80% production sites in Russia, we began using recycled content for the first time. 100% renewable electricity. Combined with our use of energy from clean or renewable sources in 12 additional markets, we are achieving savings of 67.5 kilo tonnes of CO 2 emissions annually. Approximately 90% of Coca‑Cola HBC’s carbon footprint comes from Scope 3 emissions in our value chain, which are linked to our operations but generated from sources we do not control. As we cannot achieve our ambitious sustainability objectives on our own, our work with suppliers is ever more critical. Ourprocurement team began working in 2021 with our key packaging partners on greenhouse gas emission reductions. We also launched collaborations with additional critical suppliers. Together with The Coca-Cola Company and other bottlers, we are now working on emissions reduction with 20 critical suppliers who represent over 50% of our Scope 3 emissions. In 2021, we expanded our work with the farms where our priority ingredients, including natural sweeteners and fruit, are grown toimprove productivity, compliance, transparency and resiliency. We source using the System-wide Principles for Sustainable 36 COCA-COLA HBC ### Fuel growth through competitiveness and investment continued Beyond our green fleet achievements We also made improvements to ## “New digital tools are | | forpassenger cars for our salespeople, | requirements for our suppliers, significantly | | --- | --- | --- | | improving operational | described on page 48, in Serbia we | strengthening the human rights, ethics and | | | introduced new heavy trucks fuelled by liquid | compliance practices we expect. Our buyers | ## productivity and | | natural gas in 2021. These have 50% | were retrained during the year on the | | --- | --- | --- | | helping us serve | loweremissions than conventional models. | sustainability risk assessment tools available | | | Wealso increased the capacity of our | for supplier selection and governance. | ## customers cost‑ light-weight trailers by 6%, reducing trips We use internal supply base assessments, ## effectively with better needed and further contributing to emission audits of compliance and the EcoVadis reduction. We imported bulk resin to Nigeria ## monitoring, insight platform to monitor and assess for the first time via sea cargo, moving away performance of critical suppliers. EcoVadis ## anddata.” from containerised deliveries in vessels. gives us information to monitor a range Doing so resulted in a 55Mt reduction in CO 2 ofrisks using 21 criteria from international emissions. We plan to expand our purchases standard-setters such as ISO 26000 and the of bulk resin in 2022 to further increase International Labour Organization. In 2021, emission reductions. As sugar supply was over 1,100 of our critical suppliers were disrupted, we focused on the optimisation assessed using EcoVadis, an increase of ofsugar deliveries in 2020 and 2021. about 40% compared with 2020. Our plan is to expand the use of these assessments for Sustainable procurement better, more objective supplier monitoring Our suppliers are important partners and going forward and leverage our EcoVadis contributors to the ongoing and sustainable partnership across the Coca-Cola success of our business, and we held our Systemtoimprove information sharing first Group supplier sustainability event in betweenbottlers. 2021, with 300 participants, to support collaboration. During the virtual event, company and external experts provided context regarding the environmental, social and governance (ESG) factors facing the industry, as well as examples of best practices and new opportunities arising fromsustainability. UN Sustainable Development Goals Our sustained efforts to reduce our costs and improve our impact have generated significant results for our business, our communities, society and the environment. These results correspond to contributions to the Sustainable Development Goals for clean water and sanitation, clean energy, economic growth, industry innovation, sustainable communities, responsible production, climate action, lifebelow water and life on land. 37INTEGRATED ANNUAL REPORT 2021 ## Future‑focused ## investment Gerald Lewis Head of Technology Strategy and Operations Group Digital and Technology Platform Services ### “Our continuous investment in innovation Fueling growth by investing in new digital tools andsustainabilityy ### andtechnology has delivered new digital Automation is key for our business. It helps us to be more ### products that are tightly integrated productive, enabling better, faster results, while improving ### withourevolving technology platforms. theexperience of our people, customers and partners. ### Theseproducts have achieved improved Across our Company, investments in new digital tools are helping ### operational productivity and help usto capture new growth opportunities, create more value for our customers and achieve our sustainability goals. As a result, our ### usserveour customers cost-effectively back-office systems and processes have been streamlined, we ### andin more flexible ways to meet their have achieved operating and cost efficiencies in our manufacturing ### fast-changingneeds.” plants and we have access to more relevant data insights to better serve our customers. 38 COCA-COLA HBC In 2021 we continued to listen to our people to understand how we could best support them to succeed while staying safe through the pandemic. 39INTEGRATED ANNUAL REPORT 2021 ### Growth pillar ## 4 ## Cultivate the ## potential of ## our people | Highlights in 2021 | | Priorities in 2022 | | --- | --- | --- | | • Protected the health and wellbeing | | • Build unmatched sales teams by | | | of our people as the COVID-19 | strengthening our commercial | | | pandemic continued, while further | talent pipeline | | | investing to support new ways | • Drive an inclusive and purpose- | | | ofworking | driven culture by redefining our | | • Sought more feedback from our | | culturenarrative and updating our | | | people, through the annual | leadership model | | | employee engagement survey | • Continue simplifying processes and | | | andperiodic pulse surveys, and | investing in capabilities necessary | | | acted on their feedback | to achieve our growth strategy | | • Strengthened the collaborative | | • Continue efforts to build an | | | spirit and growth mindset values | inclusive workplace and a diverse | | | which underpin our culture and | workforce that reflects our | | | continued our efforts to make | customer base and communities | learning available to everyone • Launched a unique development experience for all our frontline sales people to upgrade their critical capabilities and enhance customersupport • Continued working towards a more diverse and inclusive workforce KPIs Stakeholders Principal risks • Employee engagement • Health and safety Our people • Percentage of managers • People retention that are women • Geopolitical and security • Lost time accident rate environment 40 COCA-COLA HBC ### Cultivate the potential of our people continued Strengthening our culture As the fast pace of change continues, we Toaddressthis important finding, we have We strive to create an irresistible place to have made pulse surveys a permanent part intensified our focus on simplification. work, where our people feel heard, valued of our internal communications, ensuring To support new ways of working, we and supported. In 2021 we continued employees have multiple opportunities to conducted more meetings virtually to applying what worked best during the early provide feedback each year. This helps optimise time spent travelling and with our days of the pandemic: listening to our people ensure that management and the Board customers. In Poland and Austria, we to understand how we could best support really understand what our people need streamlined and redesigned offices, them to succeed while staying safe in a tosucceed. improving the work experience for our period of rapid change. We once again conducted three all- people while reducing costs. Our teams have emerged from two years employee surveys in 2021. The Company’s We continued offering support to family ofa global pandemic even stronger. As a Employee Engagement Index score, the members through a global employee result of their dedication, perseverance and outcome of our annual engagement survey assistance programme, providing 24/7 innovation, we helped our customers reopen conducted in October 2021, remained confidential support for our people and their quickly and adapt and grow sustainably steady at 88% with 85% of the workforce families. The programme features trained despite the turbulent market conditions. participating. We continue to benchmark our specialists through an external partner for Wecontinue to unite around a common employee engagement against other help with challenges ranging from work- purpose, democratise learning for all our high-performing companies, partnering with related issues and relationship difficulties to colleagues and build a resilient and agile Qualtrics, our partner in measuring company isolation and trauma. Help is available by organisation. culture. Our 2021 results were three phone, online or through an app. Specialised percentage points above the Qualtrics support is also provided to our line managers Support and engagement during Global Top Decile Norm, which represents to help them support team members facing the top 10% of more than 15 million people the pandemic challenges. from more than 350 companies. Ensuring the safety of our people, as well as | our customers, partners and communities, | Importantly, 96% of employees working | Health, safety and wellbeing | | --- | --- | --- | | continued to be our top priority in 2021. | directly with our customers feel they have all | We believe that a safe and healthy workplace | | Thiswas the focus of our Company | the necessary protective equipment they | is a fundamental right and also a business | | leadership as well as the cross-functional | need and 96% of all employees are aware of | imperative. As the COVID-19 pandemic | | teams leading our COVID-19 pandemic | the Company’s health and safety policies. | impacted markets across our territory for a | | response across the Group and in each | Many of our employees enjoy being able to | second year, we continually updated our | | market. We continuously adapted our | work from home at least part of the time, but | relevant guidelines and protocols. We also | | guidelines and protocols as vaccines | not everyone is the same. From survey | carefully monitored illness rates to monitor | | wererolled out and as new COVID | responses in 2020, we learned that remote | possible cases of transmission on our | | variantsemerged. | work arrangements increased the need for | premises. While employees continued to | | | line manager support. In our 2021 | become ill with COVID, we attempted to | Due to the extraordinary circumstances engagement survey, 85% of our people eliminate transmission within the workplace. in2020, we conducted two employee pulse reported feeling supported by their line surveys in addition to our annual employee As hybrid working models combining remote manager. Through surveys conducted engagement survey to better understand and office-based work became the norm, we during the year, employees expressed their what employees needed during the pandemic. focused on new approaches to wellbeing concerns about the complexity of processes and employee support. Our refreshed and the resulting impact on workloads. wellbeing framework addresses employees’ physical, mental, emotional, financial and social needs. Each of our markets offers Improvement across all Cultural pillars (% of favourable replies by the employees) tools and resources in each area, tailored to market-specific needs. In Russia, where we have an extremely comprehensive wellbeing 90 programme, our leaders act as role models, sharing their personal wellness stories. 88 To ensure a workplace that safeguards 86 mental health and supports our people when 84 mental wellbeing issues arise, we introduced a mental wellbeing policy and provided online 82 access to useful resources. This addresses 80 the risk of isolation some employees report with hybrid work arrangements. To help 78 leaders understand how they can assist in safeguarding the mental wellbeing of their 76 team, we created a guide for all managers. 74 Agility Customer Growth Meaningful Positive Work Supportive Trust in For the fourth consecutive year, no Centricity Opportunity & Empowering Environment Management Leadership employees lost their life at work during 2021. Work Regrettably however three contractors died 2018 score 2021 score in road incidents. 41INTEGRATED ANNUAL REPORT 2021 | This compares with two contractor fatalities | Similar storytelling campaigns took place in | Together with our Coca-Cola System | | --- | --- | --- | | in road incidents during 2020. Our fleet | all our markets, featuring personal, authentic | partners, we launched an International | | safety training programmes blend | stories from each region. To expand | Coca-Cola System-wide series of women’s | | classroom and on-the-road training | opportunities to share and connect, we | network events. Quarterly events were held, | | elements. Safety training combined with | builta community of over 100 colleagues | including a panel discussion with our CEO | | ongoing installation of collision avoidance | organised in an informal virtual community. | and Chief People & Culture Officer on how | | technology in fleet vehicles led to an 8.2% | We have also organised virtual Coffee Corner | leaders can drive inclusion. This role | | improvement of accidents per million | sessions attracting over 700 colleagues, | modelling was also seen in our CEO’s | | kilometres travelled in 2021. This is our ninth | which feature podcast-like interviews on | continued participation as a judge in the | | consecutive year of improvement. | topics such as how to become a better | WeQual awards for female leaders. | colleague or finding strength to Overall, employee workplace-related Newly introduced initiatives built on our facedifficulties. | accidents increased by three compared to a | | existing Inclusive Leadership e-learning | | --- | --- | --- | | previous year. Our Lost Time Accident Rate | Through our internal #thisisme campaign, | modules, available to all leaders. Every | | was 0.25 for 2021, compared with 0.23 in the | we invite our people to bring their true self to | business unit has targets and action plans | | prior year. Meanwhile, the Lost Time Incident | work by sharing photos, quotes and sources | appropriate to their market to contribute to | | Frequency Rate for contractors improved by | of inspiration and motivation. Launched | our gender diversity commitment and our | | 7.05% vs 2020. Our behaviour-based safety | initially for Group employees, the programme | DEI Community continues to ensure best | | programme was expanded from | proved extremely popular, growing organically | practices to support diversity, equity and | | manufacturing plants and warehouses to | with posts from colleagues across all | inclusion are shared across our territory. | | 90% of our commercial function. During | countries, functions and layers. | | To attract more women into our Company, 2021, we eliminated 82.8% of barriers to To further enhance our growth mindset we once again ran an International Women’s safety identified under this programme. By values and collaborative culture, a Culture Day campaign, #NoJobHasAGender, the end of 2021, we are proud to report that Activation Toolkit was launched in 2021 whichwas promoted through social media 7,652 employees and 865 contractors were giving our markets the ability to target local channels. We continued to increase our trained as behaviour-based safety observers needs. To empower people in different social media presence with a focus on supporting the programme. | | settings, the toolkit includes guides on | female career experience, covering subjects | | --- | --- | --- | | We also successfully launched the Coca- | setting up and building communities or | such as career growth and leadership. | | Cola System’s Life Saving Rules, with each of | leading from within. | Ourseries #WomenofCCHBC included 19 | | our sites taking corrective actions to achieve | | videos and was viewed by over two million | In our second year of continuous error-intolerant systems and processes by people online. performance conversations with mutual the end of 2022. accountability, nearly all of our people, 95%, We regularly review our Human Rights Policy, completed quarterly snapshot discussions our Code of Business Conduct and other Building a sense of belonging | | with their managers. More than 75% of our | internal standards to ensure we adhere to | | --- | --- | --- | | andtrust | people gave feedback to their managers | allapplicable laws and regulations and | | Our values-based culture remains a strength | during the year. Usage data for our feedback | demonstrate best practice as stakeholder | | and a source of resilience as our common | app shows that continual feedback is | expectations evolve. These documents are | | beliefs help us adapt with speed and agility. | becoming well established across the Group. | available on our website at https://www. | | Two important findings from our 2021 | | coca-colahellenic.com/en/about-us/ | | engagement survey were an increase in our | | corporate-governance/policies. | Achieving greater diversity people’s understanding and belief in our andinclusion overall purpose and vision and As part of our Mission 2025 sustainability Helping our people realise their improvements in engagement scores goals, our Company has committed potential and developing talent across all of our cultural pillars. This reflects toincrease the proportion of women To ensure that everyone in our Company the success of our efforts to empower our inmanagement to 50%. The proportion has the ability to contribute to our purpose, people and foster the growth mindset ofmanagement roles held by women edged vision and mission, we make learning needed to achieve our vision. | | up1pp to 39% in 2021. Despite continual | accessible to every employee. We provide | | --- | --- | --- | | We believe inviting people to bring their true | progress, to achieve our ambition of a diverse | tools and encouragement for our employees | | self to work and share their authentic stories | workforce that reflects our customer base | to continue growing through self-learning, | | is the best way to foster trust and | and communities we must do even more. | coaching and mentoring to develop both | | behaviours that support our strategic goals. | | leadership and functional skills. | In 2021, we created a new Diversity, Equity Storytelling is therefore used extensively and Inclusion (DEI) Steering Committee, As we continued to strengthen our culture across the business to strengthen sponsored by CEO Zoran Bogdanovic, to of continuous learning, digital learning is connections. | | provide strategic direction and governance | becoming more important. About 80% | | --- | --- | --- | | Our Red Talks programme shares personal | to our DEI efforts. To help us drive the right | ofour employees are self‑driven active | | transformation stories across the Group, | behaviours, we introduced new training to | learners on our various digital platforms. | | inspiring our people to change and grow. At | identify and act on potential instances of | Wehave expanded our Personal Learning | | our 2021 virtual leadership conference, | discrimination. Several hundred employees | Cloud, which now offers over 2,500 | | stories were shared from different countries | in our People & Culture and Legal, Ethics | resources. For the second year, we | | covering management of wellbeing to | &Compliance functions participated. | organised a virtual LearnFest. Over 6,000 | | dealing with change. | Ourworkshops on disrupting unconscious | attendees and more than 40 internal and | | | bias are also being rolled out to leadership | external speakers participated. | teams of business units across the Group. 42 COCA-COLA HBC ### Cultivate the potential of our people continued | In 2021 we further evolved our Talent Review | About 90% of new business developers | | --- | --- | | Framework to accelerate development | report satisfaction with the onboarding | | across functions and borders. We identified | experience, including feedback from | | 20% more potential emerging leaders within | theirline managers about their progress | | our workforce than in 2020. We remain | andperformance. | focused on maintaining bench strength, To identify the main drivers of business particularly in our commercial function, and developer turnover in five selected business building a strong, diverse pipeline of leaders. units, we performed an in-depth analysis A majority of participants in many of our using artificial intelligence in close leadership development programmes, collaboration with our Group Data, Insights including our Fast Forward programmes, are UN Sustainable Development Goals &Analytics team. The main findings of female. This supports our ambition to achieve Efforts to foster an engaging workplace and thisanalysis, which include issues around gender balance in senior management aninclusive environment, nurture and develop complexity, compensation and line manager the capabilities of our people, increase gender rolesby 2025. support, are now forming the basis of a balance in our management ranks and reduce As employee turnover rebounded to holistic review of how we attract, select, stress and support employee wellbeing all contribute toward global goals for development. pre-pandemic levels in 2021 to 13.1%, develop and compensate our frontline Thespecific Sustainable Development Goals compared to 8.8% in 2020 and 12.3% in 2019, salespeople. As part of this effort, we are supported are those for: good health and the higher rate of external hiring gave us the simplifying tasks so that they can spend wellbeing; gender equality; decent work opportunity to recruit people with critical more time with our customers. andeconomic growth; reducing inequalities; and peace, justice and stronginstitutions. new capabilities. As 35.5% of all external hires during the year were female, and more An attractive and authentic than half of new hires for senior leadership employer brand roles were women, we also succeeded in During 2021, we improved the visibility strengthening gender diversity. andattractiveness of our employer brand. | As the skills needed for our organisation to | We received 76 recognitions across 28 | | --- | --- | | be successful in an ever-changing market | countries reflecting different measurements | | are constantly evolving, this year we | of employer attractiveness. The perception | | launched a skills-based talent marketplace, | of our employer brand improved in 11 | | which enables us to better understand | ofourmarkets during the year, and our | In our efforts to boost the agility of our ouremployees’ skills and capabilities, while compounded average rank also improved Company, we have completed more than 80 matching them to the challenges of both according to Universum, an employer brand agile initiatives, trained over 700 people, and today and tomorrow. The programme was consultancy. We are especially proud of certified 135 Scrum Masters and 18 Agile successfully piloted in Austria in 2021 and being recognised in the Forbes World’s coaches since 2019. As we evolve into a will be rolled out to additional markets in the BestEmployers 2021 list and, thanks to our trulyagile organisation, we are establishing coming years. progress on diversity and inclusion, we were mission-based, cross-functional, th ranked 8 in the Refinitiv D&I index. empowered and self-managed teams, which | we call dynamic pods. These allow us to | Developing the critical capabilities | Over 550 of our employees post regularly | | --- | --- | --- | | improve our speed and quality of delivery on | of our sales teams | onsocial media, and we are ranked the 39th | | critical missions through dynamic staffing of | Following the 2020 launch of our digital Sales | most active company on social media in | | critical capabilities. To accelerate channel | Academy, we continued to roll out this | thefood and beverage sector in Europe, | | and category growth, we launched dynamic | comprehensive developmental experience | according to analysis by employee influencer | | pods in eight of our business units in 2021. | for our sales force across all our markets in | platform DMSN8. We encouraged social | | | early 2021. About 1,300 new business | media conversations through 24 campaigns | Taking into account the global trends of developers have completed our Licence to around our products or around specific increasing turnover and intensifying scarcity Start certification, which gives new hires a events. We also introduced monthly ‘behind of talent, development of high-performing strong onboarding experience and ensures the scenes’ features on LinkedIn and people is a top priority. We made notable they are equipped to support our customers Facebook. The initial features shared, progress accelerating the leadership even faster. Over 8,500 members of the highlighting photos of unique employee development of more than 450 of our existing sales force have also benefited from experiences, received more than 100,000 colleagues during the year. Learning from Sales Academy modules. Building on this views on each platform. others continues to act as a multiplier of success, similar learning modules designed leadership development, with 80 new active Looking ahead, we will continue for supply chain management will be rolled internal coaches and 71 new coaching strengthening our pipeline with a special out for 12,000 people in our supply chain engagements. Mentoring is now focus on our commercial function and function in 2022. | technology-enabled, with 339 active | | increasing retention through targeted | | --- | --- | --- | | mentors and 259 new mentoring | To enhance the onboarding experience | career conversations. We will also support | | engagements supported online during the | forbusiness developers, we have created | the development of our employees through | | year. The success of these initiatives is | afully integrated onboarding experience | more cross-functional, skills-based | | demonstrated by extremely highparticipant | that includes pre-onboarding activities, | development, identify and accelerate the | | satisfaction rates. All of the leadership | human resources information and | development of emerging leaders, and build | | coaching participants and 97% ofmentoring | country‑specificcontent. | a more inclusive and diverse workforce that | | participants reported satisfaction with their | | reflects the communities we serve. | learning experience. 43INTEGRATED ANNUAL REPORT 2021 ## Future‑focused ## teams Mariam Oginni Regional Sales Director, LagosCentral, Nigeria It wasn’t easy to start a new job anywhere Mariam attributes this success to working ### “Be kind, take a deep breath during the pandemic, but Mariam Oginni smartly and tremendous support from ### and remember: you miss faced additional challenges when she colleagues and managers, but also the ### 100% of shots that you became Coca‑Cola HBC’s first female diversity of her team. ### donot take.” Regional Sales Director in Nigeria in 2020. “When both genders work together,” Despite working in northeast Nigeria, which shesays, “we can accomplish more than has additional security concerns, she led her ever before.” team to deliver 20% sales growth in the region, exceeding targets. 44 COCA-COLA HBC We create value for all stakeholders, making astrong contribution to thedevelopment of thesocieties in which weoperate 45INTEGRATED ANNUAL REPORT 2021 ### Growth pillar ## 5 ## Earn our ## licence ## tooperate | Highlights in 2021 | | | Priorities in 2022 | | | --- | --- | --- | --- | --- | | • Announced NetZeroby40, our | | | • Embed our net zero ambition | | | | mostambitious environmental | | across the business and in | | | | target to date | | decision-making processes | | | • Reduced our Scope 1 and 2 | | | • Continue reducing emissions from | | | | carbonemissions by almost | | direct operations, and work with | | | | 137kilotonnes compared with | | our suppliers to reduce Scope 3 | | | | 2017baseline | | emissions across our value chain | | | • Established Italy as the first | | | • Enter new partnerships in areas | | | | Coca-Cola HBC country to launch | | such as forestry and water | | | | 100% rPET bottles for all ‘on-the- | | replenishment to remove our | | | | go’ sparkling drinks and iced tea | | residual emissions and meet our | | | • Investing in on-site PET recycling | | | science-based targets for 2030 | | | | technologies in Poland, Italy, | | • Design a sustainable packaging | | | | andRomania | | strategy that will help us reach net | | | • Achieved once again the status | | | zero, with a focus on test-and- | | | | ofEurope’s most sustainable | | learn for various package-less | | | | beverage company in the 2021 | | andrefillable solutions across | | | | Dow Jones Sustainability Index, | | ourmarkets | | | | and received ‘A’ ratings from the | | • Increase the share of rPET bottles | | | | 2021 Carbon Disclosure Project | | in our portfolio for selected markets | | | | (CDP) for climate change and water | | • Continue to progress towards our | | | • Continued to support the | | | collection targets by supporting | | | | communities where we operate | | the design and set-up of collection | | | | during the COVID-19 pandemic | | models with local market relevance | | | KPIs | | Stakeholders | | Principal risks | | • Absolute greenhouse gas | | | | • Plastics and packaging | Our people emissions Scope 1, 2, 3 waste • Water usage in water- • Managing our carbon Our communities risk areas footprint • # young people trained • Water availability Our consumers through • Suppliers and sustainable #YouthEmpowered Our suppliers sourcing • % primary packaging • Ethics and compliance collected NGOs Our shareholders Government The Coca-Cola Company 46 COCA-COLA HBC ### Earn our licence tooperate continued Delivering results for all an absolute minimum over the coming decades, building on the 50% reduction we stakeholders have already achieved over the last 10 years. Over the 70 years that we have been in Since 90% of our carbon footprint comes business, no challenge has tested all the from our value chain, it is essential that we communities in which we operate at such find new, more effective ways to collaborate scale as the COVID-19 pandemic. As our to achieve our ambition. customers, communities and partners faced additional disruptions in 2021 we continued to provide support to those in need. Contributing to the communities where we operate We created value for all stakeholders by During the first half of 2021 and the making significant contributions to the disrupting lockdowns across our territories, development of the societies in which we we continued providing support for those operate, while also finding ways to take fighting COVID-19 on the front lines in all careof our environment by integrating ourmarkets by making product, in‑kind and sustainability into our decision-making in-cash contributions to hospitals, shelters andactions. and NGOs, including the Red Cross and food | During 2021, we began to track our business | banks. In Greece we also supported the | | --- | --- | | performance based on our newly validated, | vaccination efforts of the health system | | science-based carbon emission targets for | anddonated 301 refrigerators for vaccine | | 2030. We also set new and ambitious targets | storage. We also provided disaster relief | | for sustainability beyond 2030, announcing | support in Greece, Russia, Croatia and | | our NetZeroby40 commitment to reduce | NorthMacedonia. | the carbon emissions in all our activities In 2021, we continued to provide learning across the entire value chain and reach net opportunities to community partners from zero emissions by 2040. To achieve this various non-governmental organisations goal, we will reduce our direct emissions to across the countries in which we operate. Number of young people trained through ### Supporting our communities #YouthEmpowered Product donations • Focused on frontline keyworkers and food banks 1,000,000 ## c.3m litres 548,835 Volunteering 203,865 • Focused on the vulnerable and our 338,413 customers 85,812 21,401 ## c.2,042* 2017 colleagues 2017 – 2018 2017 – 2019 2017 – 2020 2017 – 2021 Target 2017 – 2025 Community investments • Long-term community initiatives • Continued COVID-19 recovery support • Disaster relief (Greece, Russia, Croatia, and North Macedonia) ## c.€6.8*m * Including Bambi 47INTEGRATED ANNUAL REPORT 2021 Absolute Scope 1 and 2 CO 2 eq emissions Absolute Scope 3 CO 2 eq emissions Renewable and clean* electricity (‘000 tonnes) (‘000 tonnes) inoperations in the European Union andSwitzerland (%) 2030 vs. 2017 2030 vs. 2017 in 2025 600 5,000 120 -4% 563 | | | -14% | | | | | -1% | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 538 | | | | | | | | -6% | | | | | | | | | | 500 | | | | | | | | | | | | | | 100 | | | | | | | | -23% | | 4,000 | | | | | | -11% | | | | | 99 | 100 | | | | | | | | 4,079 | | 4,051 | | | | -10% | | | 97 | | | | | | 481 | | -24% | | | | | | | | | | | | | | | | | | | | | | | | | 3,845 | | | -21% | | | | | 89 | | 432 | | 3,623 | 3,683 | | | | 87 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 400 | | | | | | 80 | | | | | | 426 | | | 3,210 | | 78 | | 3,000 | 300 | | | 60 | | --- | --- | --- | --- | | | 256 | 2,000 | | | 200 | | | 40 | 1,000 | 100 | | | | | | | | | | 20 | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 0 | | | | | 0 | | | | | 0 | | | | | | | 2017 2018 | 2019 | 2020 2021 2030 | | | 2017 2018 | 2019 | 2020 2021 2030 | | | 20182017 | 2019 | 2020 2021 2025 | | | | | | | goal | | | | | goal | | | | | goal | * Clean source means CHP using natural gas. | We invited over 100 partners to join our | In Ukraine, we continued to support the | We continued to purchase renewable | | | --- | --- | --- | --- | | internal leadership training schemes and | iLearn platform, which provides free, | electricity to meet all of our needs in | | | develop their skillsets by taking part in our | high-quality education to more than 25,200 | Italy,Poland, Lithuania, Croatia, Austria, | | | programmes ‘Communicating with impact’, | high school graduates. The platform was | Switzerland, Northern Ireland, Hungary, | | | ‘Design thinking’ and ‘Influencing skills’. By | supplemented in 2021 with new webinars | theCzech Republic, Greece, Serbia and | | | the end of the year, 6% of the participants | and mock exams that further enhanced | Romania. We also continued to install | | | inCoca‑Cola HBC leadership programmes | learning. We also continued working with | solarpanels at our Nigerian operations, | | | were our community partners. | amajor online educational platform in | generating renewable electricity for four of | | | | Armenia, enabling over 8,800 students | our bottling plants. These installations are | | | #YouthEmpowered | toimprove their social and business skills. | connected to the local electricity grids and | | | With the COVID-19 pandemic still causing | InPoland, we reached out to over 22,500 | provided 1,500 tonnes of CO | 2 emissions | | economic disruption, we accelerated our | young people with an educational application | savings in 2021. | | | #YouthEmpowered programme using both | that boosts soft and business skills. | | | in-person and online modules. The | programme reached more than 210,000 | Climate and renewable energy | | --- | --- | | young people in 2021, bringing the total | achievements | | number who have participated in the | In 2021, we continued to work towards our | | scheme since it was launched in 2017 | Mission 2025 commitments, addressing | | to548,000. | climate change by reducing our emissions | and increasing our use of renewable energy. Italy has seen continuous growth in youth We reduced absolute emissions from our employment programmes thanks to its direct operations and production by a Ministry of Education’s teaching scheme, further 6 kilo tonnes, achieving a cumulative which encourages high school students 24% reduction against our 2017 baseline. togain additional training or do internships. | There is also an increasing demand for | | We also increased the use of renewable and | | --- | --- | --- | | online education in Italy and a long-standing | 100% -21% -55% | clean electricity in our operations in the EU | | partnership with several educational | | and Switzerland to 99%. At the same time, | | platforms, and this has helped almost | | we delivered on our 2025 renewable and | | 100,000 participants to benefit from our | | clean energy goal, reaching 53% (9ppt | | #YouthEmpowered programme. We also | | increase compared to 2020). In support | | delivered masterclasses for hotel school | | ofthis objective, we transitioned all 10 of | | students and continued running ‘Girls in | | ourproduction sites in Russia and our | | STEM’, a programme that encourages | | operations in Cyprus to 100% renewable | | female students to pursue careers in | | electricity, saving 66,000 tonnes of CO | 2 science, technology, engineering or math. emissions on an annual basis. 48 COCA-COLA HBC ### Earn our licence tooperate continued Partnerships with suppliers About 90% of our carbon footprint is made up of downstream emissions from our toreduce emissions in our products and upstream emissions found supplychain inour supply chain, so we need to work Partnering with our suppliers is the key withour suppliers to reduce our overall toachieving our ambitious NetZeroby40 emissions. In 2021, we were awarded an target. In 2021, we held our first Group ‘A’ranking as a Supplier Engagement Leader Supplier Sustainability event in which we forthe sixth consecutive year by the Carbon discussed with more than 300 external Disclosure Project (CDP), an organisation experts globally how businesses can that collects climate-related data. CDP partnerto face international challenges on assesses how effectively companies are environment, social and governance (ESG) engaging their suppliers on climate change, factors. Additionally, we continued hosting and issues letter grades to indicate their the Supplier Innovation Days, where our level of success. Our results placed us in keystrategic partners share with us their UN Sustainable Development Goals thetop 8% of companies, earning us an freshest, smartest and most innovative ideas. Our community initiatives contribute to ‘A’rating and a place on CDP’s leader board. theSustainable Development Goals (SDGs). Tackling emissions in our supply chain Ourinitiatives to empower youth and women This rating builds on ‘A List’ rankings for Managing our carbon footprint has been contribute to the goals for quality education, ouractions in addressing climate change decent work and economic growth, sustainable identified as a Principal risk for the company, andwater security. cities and communities, and partnerships. (see page 62) and has also been identified Ourinitiatives regarding water stewardship, “To build a more sustainable company and asa key transitional risk in our climate CO 2 emissions reduction and waste reduction future, we have so far initiated sustainability change risk programme, (see page 69). aid global progress towards the SDGs for partnerships with about 20 critical suppliers, cleanwater and sanitation, and climate action. representing 50% of our upstream, scope 3 Ourinitiatives in communities help advance the global objectives of good health and wellbeing, emissions,” says Marcel Martin, our Chief and sustainable cities and communities. Corporate Affairs and Sustainability Officer, and former Chief Supply Chain Officer. ### Green Fleet transition To achieve our ambitious climate goals itisessential that we make a progressive transition towards more sustainable technologies for both our light and heavy fleet. To make this happen, we have launched our ‘Green Fleet Programme’ andset clear targets across our business territories, with a comprehensive roadmap to achieve our goals. We have accelerated our transition throughout 2021 by introducing battery and plug-in electric car models in 15countries. In 13 of our markets, our fleet contains hybrid electric vehicles and vehicles powered with compressed natural gas orliquified petroleum gas. Asaresult, 16% of our light fleet is now made up of more environmentally friendly models, which have helped achieve a reduction of CO 2 emissions in grams per kilometre of 7% compared witha 2019 baseline, and a total reduction inCO 2 emissions of 11,130 tonnes. Across the heavy fleet, we have reduced our CO 2 footprint by 11% compared with the same 2019 baseline, equivalent toareduction of23,681 tonnes of CO 2 . 49INTEGRATED ANNUAL REPORT 2021 Our initiatives in packaging On a Group level, efforts to increase the ### Our Mission 2025 sustainable packaging commitments percentage of rPET used to manufacture our bottles led to a slight increase, up 1ppt Our commitments 2021 achievements compared with 2020. While we had several • Recover 75% of our primary packaging 100% rPET launches, their impact was diluted for recycling or reuse by2025 due to strong growth in markets which do ## 46% not currently use rPET, such as Nigeria. of our total primary packaging was collected in 2021 for recycling or reuse Italy became the first Coca‑Cola HBC market to launch a 100% rPET bottle for • Make 100% of our primary packaging sparkling brands in 2021. The 100% rPET fully recyclable by 2025 ## 99.9% packaging was introduced for all on-the-go of our primary packaging is recyclable packs of Coca-Cola, Fanta and Sprite, as well as FuzeTea. We also introduced 100% rPET • Increase the percentage of rPET in rPET: bottles for a fifth Coca‑Cola HBC water ourbottles to 35% by 2025. Inour EU brand, Natura, in the Czech Republic. countries, we plan to reach 50% rPET ## 10% by 2025 We also expanded our use of KeelClipTM, of the PET that we used across total which replaces plastic film on multi-can CCHBC markets was rPET packs with an innovative paperboard solution. By the end of 2021, it had been rolled out in 10 markets. We aim to introduce ## 18% KeelClipTM in Greece and Hungary in of the PET that we used in CCHBC early2022, and to replace plastic film on EUandSwitzerland markets was rPET multi‑canpacks across all our EU markets forThe Coca‑Cola Company portfolio products. We expect these effortsto reduce our use of virgin plastic by 2,000tonnes annually across the Group. Wecontinue to We have also played a leading role in aligning pilot further methods of lightweighting or Progress towards sustainable industry peers and advocating for well- reducing packaging, and some of our packaging designed collection schemes in an additional successes will be implemented during 2022. Plastics and packaging waste has been seven markets: Bulgaria, the Czech Republic, assessed as a Principal risk for the Company, Partnerships help us achieve Hungary, Poland, Serbia, Slovenia and (see page 62) and a key transitional risk packagingobjectives Northern Ireland. In Hungary, we expect a under our climate change risk programme, In Austria, we are working with Reclay, a state-owned deposit return scheme to be (see page 69) given the additional costs we packaging recovery organisation, to fulfil our implemented by 2024. | expect to incur in achieving our Mission 2025 | | responsibility to support the sustainability | | --- | --- | --- | | targets as well as future long-term targets. | While we believe deposit return schemes | ofproduct packaging. In Vienna, consumers | | | arethe right solution for many countries, | are rewarded through an app developed | As part of our Mission 2025 targets, we have especially EU markets, a first step is to set byReclay and the Coca‑Cola System to committed to collect 75% of our packaging upwell‑functioning packaging recovery prevent littering. By checking in via geo‑ for recycling or reuse by 2025. In addition, organisations, known as PROs, to tagging at a recycling bin and scanning we support the Coca-Cola System World organisethe efficient implementation theproduct code, consumers are able to Without Waste ambition to reach 100% offit‑for‑purpose national collection and participate in a lottery with weekly and collection by 2030. recoverysystems. monthly draws to win prizes. We believe that, wherever possible, In several of our developing and emerging We began working with METRO, a leading collection systems should be established on markets we are helping to establish or international player in wholesale trade, which a national level. Where effective systems do improve such packaging recovery has launched an international collaboration not exist, we participate actively to support organisations. In 2021, we supported to help clean up the world’s oceans. METRO the set-up and implementation of new successful pilots for new packaging recovery aims to recover millions of kilos of plastic packaging collection schemes. Delivering organisations in Ukraine and Moldova. In waste before it reaches the oceans, and to this sort of meaningful change takes time. addition, we funded collection modelling improve the lives of vulnerable communities Looking beyond the +2ppt increase we studies or supported advocacy efforts in six in coastal regions by promoting more achieved for packaging collection in 2021 markets, including Nigeria and Russia, while sustainable packaging and recycling. compared with 2020, we have made implementing the learnings from pilot Thiscollaboration included numerous substantial progress in developing projects and collection modelling. suppliers, including Coca‑Cola HBC and sustainable national packaging collection Coca-Cola Europacific Partners. METRO We also support a circular economy for solutions by playing a leading role in their also promoted products in recyclable or packaging by increasing our use of recycled design and set up across multiple markets. recycled plastic across countries. plastic, or rPET, and reducing or eliminating We are actively engaged in supporting the plastic use where possible. implementation of deposit return schemes in seven of our markets (Austria, Cyprus, Greece, Ireland, Latvia, Romania and Slovakia). We expect these to go live between 2022 and 2025. 50 COCA-COLA HBC ### Earn our licence tooperate continued | Water stewardship | The certifications confirm that we meet | Folegandros into a zero water loss island and | | --- | --- | --- | | Water is the main component of our | theglobal benchmark for responsible water | save 10M litres of water every year. And in | | beverage production, which is why we | stewardship, with 52 bottling plants achieving | Russia, we will focus on modern monitoring | | haveaspecial responsibility to protect this | a Gold or Platinum Standard certification. | technologies to improve the ecological state | | precious resource. Water availability and | | of the three most polluted rivers in the | The standards require certified businesses usage has been assessed as a Principal risk Moscow region. to use water as little as possible, as well as forthe Company, see page 64; and both toreduce water consumption where possible aphysical risk, see page 68, and transitional across the entire value chain. Special Water use ratio in water priority plants risk under our climate change risk programme. emphasis is placed on working together (litre/litre of produced beverage) We are reducing the amount of water we withstakeholders and local communities usein all our activities and paying significant toensure that any water challenges are attention to our impact in water-stressed 2025 vs. 2017 tackledsuccessfully. 2,5 areas. To achieve our 2025 goals, we are In Nigeria, one of the main water risk areas, working to minimise water use by 20% in we created a water task force to upgrade | plants that are located in water risk zones. | | 2,0 | | | | | | --- | --- | --- | --- | --- | --- | --- | | | thewater facilities in our operations. By the | | 1.97 | | | | | Together with our stakeholders and our | | | | 1.93 | | | | | | | | | 1.821.82 | 1.80 | end of 2021, all water systems at our bottling communities in those watersheds, we also plants in Nigeria had been upgraded with 1,5 1.57 want to make sure that people in water new installations and advancements, such riskzones where we operate have access asnew sand and carbon filters, water tanks, tosafe, clean water. 1,0 and the drilling of new boreholes. These In 2021, all our bottling plants were certified advancements will enable us to reduce our to have met the standards of the Alliance impact on precious water resources. 0,5 forWater Stewardship (AWS), except for In 2022 we will further engage with two water theLurisia plant in Italy and the Natura plant stewardship projects. In Greece, together 0,0 inthe Czech Republic (certification now 2017 2018 2019 2020 2021 2025 with our NGO partners, GWP-Med, we aim covers96% of our bottling plants and 99.6% goal to make technical interventions that will turn ofproduction volume). 1 ### Locations with water priority plants Nigeria Moscow region Bulgaria Italy Armenia Greece Cyprus Water priority locations -20% 1. Water priority locations are defined based on our comprehensive risk assessment (i.e. access to WASH, water stress and other local risks). 51INTEGRATED ANNUAL REPORT 2021 ## Future‑focused ## packaging Anna Gronostajska Quality, Safety and Environment Manager The future of packaging towards To improve our supply of rPET we have ### “It’s exciting to work with new introduced innovative technology on-site net zero ### technologies that contribute atour Krakow plant in Poland which allows Our business uses various packaging ### to our NetZeroby40 target. ustoprocess non-food grade ‘hot washed’ materials and delivery methods, each ### Our efforts to increase rPET PET flakes, which are readily available, withdifferent carbon footprints. Because toproduce high-quality food-grade rPET. ### supply at our Krakow plant nearlyathird of our carbon emissions are Thishelps getaround the need for highly attributable to our product packaging, it is ### will impact emissions related segregated recycling, which is currently essential that we innovate in this area to ### to our product packaging, rare. To further increase the use of rPET achieve our ambitious NetZeroby40 target. inour portfolio, wewill also introduce this ### which is nearly a third Bottles made from rPET have a much process in Italy in2022 and Romania in 2023. lowercarbon footprint than PET bottles ### oftheCompany’s total made from virgin material, but high-quality ### carbonemissions.” food-grade rPET is both scarce andexpensive. 52 COCA-COLA HBC ### Key performance indicators ### We measure our performance against our strategic ## Tracking our objectives using specific key performance indicators ### (KPIs). These KPIs allow us, and our stakeholders, ### totrackour progress in delivering on our targets. ## progress ### These are also the financial and operational ### milestones which wefocus on in implementing ### ourGrowth Story 2025 strategy. Growth pillar Growth pillar ## 21 ## Leverage our unique Win in the ## 24/7 portfolio marketplace How we measure our progress Volume growth (%) Volume is measured in unit cases, where one unit case represents 5.678 litres. We grow volume as 15 we expand per capita consumption of our products Like-for-like 14.0 and expand into new market or categories. 13.0 12 What happened in the year 1 9 Volume grew by 13%, or 14% on a like-for-like basis. Volumes grew rapidly as our Established and Developing markets reopened and the Emerging 6 markets benefited from strong recovery. Like-for-like 4.2 3 2.6 Link to remuneration 3.3 Revenue growth is used to assess business 2020 0 performance for the purpose of annual 2018 2019 2021 Management Incentive Plan (MIP) bonus awards, -3 and volume is a key component of revenue. -5.7 Like-for-like -6 -4.6 See p123 for a full description of the MIP. -9 How we measure our progress Currency‑neutral revenue Currency‑neutral revenue growth (%) We measure revenues on a currency-neutral and percasegrowth(%) like-for-like basis to allow better focus on the underlying performance of the business. We grow 6 25 currency-neutral revenue per case through pricing 5.8 and other RGM actions. Like-for-like 20 What happened in the year 4 20.6 19.6 Currency-neutral revenue per case grew by 5.8%, 15 or by 3.9% excluding pricing taken to pass on the 2 Polish sugar tax, as positive category mix and 1.7 | package mix as well as pricing actions drove | | | | | 10 | | --- | --- | --- | --- | --- | --- | | | | | 1.0 | 2020 | | | improvement. Currency-neutral revenue grew | 0 | | | | | | | | 2018 | 2019 2021 | | | | by19.6%, or by 20.6% on a like‑for‑like basis. | | | | | 5 | 6.0 Like-for-like Link to remuneration 4.4 -2 3.7 2020 Revenue growth is used to assess business 0 2018 2019 2021 performance for the purpose of our MIP awards. -4,1 -4 -5 See p123 for a full description of the MIP. Like-for-like -9.6 -8.5 -6 -10 1. Performance, unless stated otherwise, is negatively impacted by the change in classification of our Russian Juice business, Multon, from a joint operation to a joint venture, following its re‑organisation in May 2020. Performance is also positively impacted by the acquisition of Bambi in June 2019, when compared to 2019. Unless stated otherwise, performance compared to 2019 is presented on a like-for-like basis. 53INTEGRATED ANNUAL REPORT 2021 Growth pillar ## 3 ## Fuel growth through ## competitiveness and investment How we measure our progress Comparable EBIT margin (%)Comparable EBIT (%) We measure this by comparable EBIT and comparable EBIT margin progress. Wegenerate 1000 12 positive operational leverage as wegrow revenues on our efficient cost base. Using a comparable 11.6 measure allows us to adjust for one-off items which | | 800 | | | | 831.0 | | | | 11.0 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | impact comparability ofperformance year on year. | | | | | | | | 10.8 | | | | | | 758.7 | | | | | | Like-for-like | | What happened in the year | | | | | | 10 | 10.2 | | 10.6 | | | | 680.7 | | 672.3 | | | | | | Comparable EBIT grew by 23.6%. Comparable 600 EBIT margins grew by 60bps taking EBIT margins to 11.6% as revenue recovery generated operating leverage in the business. 30bps of the expansion 400 was due to a property divestment in Cyprus. 8 Link to remuneration Comparable EBIT is used to assess business 200 performance for the purpose of our MIP awards. See p123 for a full description of the MIP. 0 6 2018 2019 2020 2021 2018 2019 2020 2021 How we measure our progress CapEx as percentage of NSR (%) ROIC (%) We measure capital expenditure (CapEx) as a percentage of net sales revenue (NSR), and ROIC 8 16 (return on invested capital), to ensure prudent capital allocation and efficient working capital management. 7.6 Disciplined investment supports our growth. 7.5 14.8 What happened in the year 7 14 14.2 CapEx as a percentage of NSR reached 6.9 13.7 7.5%,within our targeted range for this metric. Weprioritised investments based on our strategy, 6.4 particularly focusing on growth markets, digital 6 12 andsustainability. ROIC increased by 370bps to14.8%as operating profit improved and we 11.1 continued to carefully controlnet working capital. 5 10 40bps of the improvement was due to a property divestment in Cyprus. Link to remuneration ROIC is given a 42.5% weighting in the assessment 4 8 of performance conditions used to determine 2018 2019 2020 2021 2018 2019 2020 2021 long-term Performance Share Plan (PSP) awards. See p123 for a full description of the PSP. Growth pillar Growth pillar ## 4 5 ## Cultivate the potential Earn our licence ## of our people to operate | How we measure our progress | Employee engagement score (%) | How we measure our progress | | --- | --- | --- | | We conduct an engagement survey with an | | Progress on Mission 2025 as well as progress | | independent third party and measure our results | | towards ourNetZeroby40 ambition. | 100 against the norm for companies which perform What happened in the year highly on this metric. We made progress against most areas of 88 What happened in the year 85 commitments; however, we need to accelerate 80 | Our employee engagement is above the global | | | | | ourimprovement in packaging. Please see details | | | --- | --- | --- | --- | --- | --- | --- | | topdecile norm. | | | | | ofour performance on the following page. | | | Link to remuneration | | 60 | | | Link to remuneration | | | Maintaining our high engagement score is part | | | | | Our efforts and ambitions are long term and | | | ofthe CEO’s individual performance metrics. | | | | | cumulative, therefore greenhouse gas reduction | | | These are used along with business performance | | 40 | | | isused to determine long‑term PSP awards. | | | measures to determine the CEO’s annual MIP | | | | | Greenhouse gas reductions have a 15% weighting | | | bonus award. | | | | | in PSP determinations. The benefit of this KPI is | | | | | 20 | | | that it is quantifiable, and several of our Mission | | | | Read more on pages 39-43. | | | | 2025 commitments feed into its progress. | | | | | 0 | | | | Read more on pages 54-55. | | | | | Global Top | Employee | | | | | | | Decile norm | engagement | | | 54 COCA-COLA HBC ### Sustainability targets Sustainability UN’s Sustainable Development Goals 2021 1 | areas Material issues | | (SDGs) and their targets | | | 2025 commitments | | performance Status | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Climate and | • Climate change | | 7.2 | 9.4 11.6 | | reduction in carbon ratio | | Overachieved 2025 goal. | | | | | | | 30% | | 36% | | | | • Economic impact | | 7.3 | | | indirectoperations | | | renewable ## Earn our ### 5 energy ## licence to 12.2 13.1 increase in energy-efficient ## 50% 42% refrigerators to half of our coolers ## operate in the market of our total energy from renewable Overachieved 2025 goal. ## 50% 53% 2 andclean sources total electricity used in the EU ## 100% 99% andSwitzerland from renewable 2 | | | | | | | andclean | sources | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Water | • Water stewardship | 6.1 | 9.4 11.6 | | water reduction in plants | | | Further implementation of | | | | | | | 20% | | | 8% | | | Mission 2025 – | | | | | | | | | successful practices and | | | | • Economic impact | 6.4 | | | locatedinwater‑risk areas | | | | reduction and innovations for those locations 6.5 (waterpriority locations) ## our sustainability stewardship is planned. 6.6 12.1 15.1 17.17 help secure water availability for Four projects out of ## commitments 100% 21% 19locations. Two more projects 12.2 allour communities inwater‑risk agreed and will start in2022. Sustainability is integrated into 12.4 areas (water priority locations) every aspect of our business. Itisfundamental to our business World Without • Packaging and waste 8.4 9.4 11.6 help collect the equivalent of 75% Action plan in place to deliver ## 75% 46% roadmap targets, see page 49. strategy, which aims to create management of our primary packaging Waste | andshare value with all of | • Economic impact | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | ourstakeholders. | | | | | | | While we had a number of 100% | | | | 12.1 | 14.1 17.17 | | of total PET used from | | | | | | | | 35% | | 10% | | rPET launches, their impact was Our Mission 2025 approach 12.2 recycledPET and/or PET from diluted due to strong growth in isbased on our stakeholder 12.5 renewablematerial markets such as Nigeria which materiality matrix and is fully aligned don’t currently use rPET. with the United Nations Sustainable of consumer packaging to ## Development Goals (SDGs) and 100% 99.9% 3 berecyclable their targets. Our six key focus areas reflect our value chain: Ingredient • Product quality 8.3 9.4 12.1 of our key agricultural ingredients Acceleration of 2021 volume ## 100% 80% required new suppliers to be reducing emissions; water use • Human rights, diversity 8.8 12.2 sourced in line with sustainable sourcing added, who will be certified andstewardship; packaging andinclusion 12.4 agricultural principles inthe near future. | (WorldWithout Waste); ingredient | | | 12.6 | | --- | --- | --- | --- | | | • Economic impact | 13.1 | | | sourcing; nutrition; and our people | | | 12.7 | • Sustainable sourcing and communities. Thetable provides data on the | | Nutrition | • Product quality | 3.4 12.8 | | reduce calories per 100ml | | | --- | --- | --- | --- | --- | --- | --- | | progress of each of the six | | | | 25% | | 15% | | | | • Nutrition | | | ofsparkling softdrinks | | sustainability pillars. 4 (allCCHcountries) • Responsible marketing | Our people | • Human rights, diversity | | 3.4 | 4.3 | 5.5 | | community participants in | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | 10% | | 6% | | | | andinclusion | 3.6 | 4.4 | | | first-time managers’ development | | and • Employee wellbeing programmes communities andengagement | | 8.5 | 10.2 | 11.6 | | train one million young people | | Cumulative number 2017‑2021; | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | 1 MLN | | 548,835 | | | • Corporate citizenship | | | | | | | 2021‑only number is210,422. | | | 8.6 | 10.4 | | | through #YouthEmpowered | | | | • Packaging andwaste | 8.8 | | | | | | | management | | 12.2 | 16.7 17.16 | | | engage in 20 zero-waste | | 5 | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | 20 | | 11 | | | • Economic impact | 12.4 | | 17.17 | | partnerships (cityand/or coast) | | | of employees take part Due to continued COVID-19 ## 10% 7% restrictions, no mass involunteeringinitiatives volunteering events werepossible. target zero fatalities among ## ZER0 ZER0 ourworkforce Note: The 17 SDGs are an urgent call for action byallcountries – developed and developing reduced (lost time) accident rate Themain causes for the ## – ina global partnership. Each of the 17 goals 50% 38% accidents were falls, slips per 100 FTE hasveryspecific targets, referenced by the andtrips. numbers shown above. You can read more about the SDGs and these targets here: of managers are women ## https://sustainabledevelopment.un.org/sdgs. 50% 39% 55INTEGRATED ANNUAL REPORT 2021 Sustainability UN’s Sustainable Development Goals 2021 1 | areas Material issues | | (SDGs) and their targets | | | 2025 commitments | | performance Status | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Climate and | • Climate change | | 7.2 | 9.4 11.6 | | reduction in carbon ratio | | Overachieved 2025 goal. | | | | | | | 30% | | 36% | | | | • Economic impact | | 7.3 | | | indirectoperations | | | renewable energy 12.2 13.1 increase in energy-efficient ## 50% 42% refrigerators to half of our coolers in the market of our total energy from renewable Overachieved 2025 goal. ## 50% 53% 2 andclean sources total electricity used in the EU ## 100% 99% andSwitzerland from renewable 2 | | | | | | andclean | sources | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Water | • Water stewardship | 6.1 | 9.4 11.6 | | water reduction in plants | | | Further implementation of | | | | | | 20% | | | 8% | | successful practices and • Economic impact 6.4 locatedinwater‑risk areas reduction and innovations for those locations 6.5 (waterpriority locations) stewardship is planned. 6.6 12.1 15.1 17.17 help secure water availability for Four projects out of ## 100% 21% 19locations. Two more projects 12.2 allour communities inwater‑risk agreed and will start in2022. | | | 12.4 | | areas (water priority locations) | | | | --- | --- | --- | --- | --- | --- | --- | | World Without | • Packaging and waste | 8.4 9.4 11.6 | | help collect the equivalent of 75% | | Action plan in place to deliver | | | | | 75% | | 46% | | roadmap targets, see page 49. management of our primary packaging Waste • Economic impact 12.1 14.1 17.17 of total PET used from While we had a number of 100% ## 35% 10% rPET launches, their impact was 12.2 recycledPET and/or PET from diluted due to strong growth in 12.5 renewablematerial markets such as Nigeria which don’t currently use rPET. of consumer packaging to ## 100% 99.9% 3 berecyclable Ingredient • Product quality 8.3 9.4 12.1 of our key agricultural ingredients Acceleration of 2021 volume ## 100% 80% required new suppliers to be • Human rights, diversity 8.8 12.2 sourced in line with sustainable sourcing added, who will be certified andinclusion 12.4 agricultural principles inthe near future. 12.6 • Economic impact 13.1 12.7 • Sustainable sourcing | Nutrition | • Product quality | 3.4 12.8 | | reduce calories per 100ml | | | --- | --- | --- | --- | --- | --- | | | | | 25% | | 15% | | | • Nutrition | | | ofsparkling softdrinks | | 4 (allCCHcountries) • Responsible marketing Key to performance status Each of the Mission 2025 commitments | Our people | • Human rights, diversity | | 3.4 | 4.3 | 5.5 | | community participants in | | is broken down into aseries of annual | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | 10% | | 6% | | | | | andinclusion | 3.6 | 4.4 | | | first-time managers’ development | | targets that need to be met in order | and tobe fully on track with our 2025 goal. • Employee wellbeing programmes communities Thecolour coding below reflects the andengagement | | 8.5 | 10.2 | 11.6 | | train one million young people | | Cumulative number 2017‑2021; | current status in relation to the desired | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | 1 MLN | | 548,835 | | | | • Corporate citizenship | | | | | | | 2021‑only number is210,422. | position at this point in time on the | | | 8.6 | 10.4 | | | through #YouthEmpowered | | | | trajectory towards 2025 and our agreed • Packaging andwaste 8.8 action plans, i.e.: management | | 12.2 | 16.7 17.16 | | | engage in 20 zero-waste | | 5 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | 20 | | 11 | | We are fully ahead or on track | | • Economic impact | 12.4 | | 17.17 | | partnerships (cityand/or coast) | | | | tomeeting the target We are not fully on track, but | | of employees take part | | Due to continued COVID-19 | wedo not believe there is risk | | --- | --- | --- | --- | --- | | 10% | | 7% | | | | | | | restrictions, no mass | tomeeting the target | involunteeringinitiatives volunteering events We are not on track, and without werepossible. corrective action there is risk thatwe will miss the target target zero fatalities among ## ZER0 ZER0 ourworkforce reduced (lost time) accident rate Themain causes for the ## 50% 38% 1. Baseline 2017. accidents were falls, slips per 100 FTE 2. Clean source means CHP using natural gas. andtrips. 3. Technical recyclability by design. 4. Baseline 2015. of managers are women ## 50% 39% 5. Supported by The Coca-Cola Foundation. 56 COCA-COLA HBC ### Managing risk and materiality Materialissues are integrated in our strategy, Although these are the material issues our short-, medium-, and long-term goals, facing our business, they should not be ## Material and are linked to management of our viewed inisolation as they are interconnected principal risks and opportunities. andimpacting each other. The Social Responsibility Committee of the Board ## issues This ensures that our approach to subsequently endorses the prioritised list of sustainability is focused on achieving the issues, resulting in the materiality matrix below. greatest impact and tackling the issues that matter most. In our 2021 materiality survey, packaging and waste management was again assessed Our materiality process also informs our as the number one topic, for the fourth To understand which issues matter most disclosure, including the content of this yearin arow, followed by climate change toour business, our stakeholders and the report. Our Integrated Annual Report is (forthesecond consecutive year). For our communities where we operate, we conduct aligned with the principles and elements stakeholders, theimportance of sustainable a rigorous materiality assessment each ofthe International Integrated Reporting sourcing and economic impact continue year.As part of this process, we consider Council’s (IIRC) framework and prepared in being very high, and the top five league abroadrange of issues including external accordance with the GRI Standards, amongst iscomplemented byproduct quality. trends inthe food and beverage industry; others. Periodically, we adjust our approach issuesidentified in international standards as standards and best practice evolve. The Executive Leadership Team has and benchmarks; the UN Sustainable responsibility for integrating our sustainability Our annual materiality survey, a key part Development Goals; and input priorities into our business strategy and ofour materiality process, is performed fromstakeholders. activities. Management of the potential risks, together with The Coca-Cola Company. opportunities and impacts of our material Our annual materiality assessment is carried Atthe end of 2021 we approached around issues takes place across the Company out in four phases: 1) identify material issues; 1,860 external and internal stakeholders, andis disclosed throughout this report. 2) assess impact on or importance to including consumers, customers, suppliers, Additional information about our material stakeholders; 3) assess impact on society employees, communities, governments, issues is included in our GRI Content and environment; and 4) review and validate non-governmental organisations, investors, Indexonline. | findings. With this process we can manage | trade associations and academics. | | | --- | --- | --- | | the risks and opportunities material issues | Theoutcome of the survey is a ranking | We support the UN sustainability agenda | | present and address the challenges | ofmaterial issues, plotted in the materiality | and align our efforts with the UN Sustainable | | wearefacing. | matrix. By assessing the importance of | Development Goals (SDGs). Our Mission | | | these issues to our stakeholders and their | 2025 sustainability commitments, our | In line with the Global Reporting Initiative decisions, combined with an assessment of short-, medium- and long-term ESG goals, (GRI) Standards, we define material issues the impact on society and the environment, and our material issues, are all linked to the asthose having significant economic, we derive the relative materiality of each UN SDGs and their underlying targets. You environmental and social impacts or issue and prioritise them accordingly. can find more about how our material issues thosewhich substantively influence the and sustainability commitments link to the assessments and decisions of stakeholders. SDGs on pages 54-55 of this report and onourwebsite. 2021 Materiality matrix Packaging and waste management Very highHighModerate Climate change Economic impact Corporate governance Product quality Sustainable sourcing Employee Human rights, diversity and inclusion Corporate citizenship wellbeing and engagement Nutrition Importance to stakeholders Water stewardship Responsible marketing Very highHighModerate Impact of the issue on environment and society Economic dimension Social dimensionEnvironmental dimension 57INTEGRATED ANNUAL REPORT 2021 Due to the continuing impact of COVID-19, Additional stakeholders suggestions ## Recommendations our 2021 stakeholder forum was yet included: againheld online. While safeguarding ## from stakeholder • driving improvements along the everybody’s health, it also allowed us to wholevalue chain, thus empowering ## forums inform reduce our carbon footprint. Forum 21’s local businesses, NGOs, customers theme was ‘Winning ESG Partnerships: andconsumers; ## ourplans When One Plus One Exceeds Two’, and • driving industry-level, collaborative theevent placed special emphasis on ### Throughout 2021, business alliances; sustainable packaging and climate action. ### weworkedto implement • knowledge sharing and expert support Over 60 stakeholders from 24 countries for NGOs (e.g., training); ### recommendations from our attended to discuss better, stronger ESG • working with local suppliers and partnerships. As in prior years, participants ### 2020 stakeholder forum, which motivating them to follow ESG included our investors, customers, ### focused on climate action standards to become a part of corporate suppliers, NGOs, academia, policy makers, supply chains; and ### inthe new normal. 2020 and other stakeholders. • partnering on empowering young ### forumoutput was one of the The Forum sought to get input regarding women in STEM. several aspects of partnerships including: ### driversthat inspired our bold These outcomes and recommendations • the key ingredients of successful ### NetZeroby40 commitment were subsequently discussed with the partnerships; ### (please refer to the Social Responsibility Committee of the • processes for creating shared value Board. They will also serve as a basis for ### NetZeroby40 section of the forpartners or win-win situations; and creating a Partnership Model that will help ### report on page 46-48). • ways to measure success. us guide and design joint ESG initiatives. | The primary outcome of Forum 21 was | The Partnership Model will be shared | | --- | --- | | recommended ingredients needed to | withboth our stakeholders and our | | create successful ESG partnerships. | markets in 2022. | Theseinclude: • shared vision, cultural alignment andpassion; • shared sustainability mindset, similar business models and strategies; • successful thinking and long-term planning; • a clearly defined picture of success andmilestones; and • flexibility and understanding betweenparties. At Forum 21, an ESG Partnership Stakeholders also had suggestions for Awardwas presented to the Romanian creating impact through partnerships, packaging recovery organisation suchas advancing business and civil sector GreenPoint Management, a company we cooperation and bringing more disruptive, have partnered with for over three years. value-adding ideas with scalable, Theaward recognised GreenPoint commercial potential. The consensus was Management’s contribution to the that approaching objectives as a business development of infrastructure for separate case is linked with future success. waste collection and responsible waste Ourstakeholders stressed the need to management in Bucharest and other ensure goals for ESG partnerships are Romanian cities. trulycircular, with focus on impact and | outcome, not just inputs and outputs. | In 2022 we will continue expanding and | | --- | --- | | Theyalso suggested that the Coca-Cola | strengthening partnerships in those areas | | System continues sharing knowledge and | prioritised as highly material. | resources and co-creating with partners. 58 COCA-COLA HBC ### Managing risk and materiality continued ofthe effectiveness of our internal controls and further details of that review are set ## Effective management outin the Audit and Risk Committee Report on pages 108-109. ## of risk Principal risks in 2021 In 2021 the COVID-19 pandemic continued to have a significant impact on our business. While general market conditions improved as restrictions on hotels, restaurants and Managing risk and uncertainty Group management cafés lifted, we continued to see intermittent In 2021, we continued to drive the principles The CRO also facilitates a discussion twice restrictions during the year as surges in of our SmartRisk programme through each year with Group Function Heads COVID-19 cases continued and governments ourbusiness. SmartRisk, our approach andtheir teams to review key operational, acted accordingly. Despite this volatility, our toenterprise risk management (ERM), strategic and emerging risks across the business remained agile, adjusting channel isdesigned to encourage managers to business and identify best practices for mix and customer support and service to proactively identify and understand risks mitigation plans to improve our risk and ensure excellent business results. asearly as possible and find ways of turning resilience response. The continued roll-out of vaccines across potential problems and incidents into The outcome of these discussions and the our territories and the lower severity of the opportunity – or at least reduce the impact reviews with the business units and region now dominant Omicron variant reduced the ifand when risks occur. teams are reviewed by the Group’s Risk and health and safety risk to our people from the The risk management programme is led Compliance Committee. The Committee’s pandemic. However, we continued to see byour Chief Risk Officer (CRO), who works comments are shared with the Executive surges in case numbers across our markets. inclose collaboration with the risk owners Leadership Team and the Audit and Risk Despite numerous internal cases, we across our business units and Group Committee of the Board. experienced no disruptions in our operations. functions in assessing and managing The CRO presents an overview of key The final stages of 2021 saw tensions rise business risks. The CRO is tasked with operational, strategic and emerging between Russia and Ukraine that led to maintaining a wide-angled view of all business riskseach quarter to both the Executive conflict in early 2022. We focused onthe streams and emerging risks and opportunities Leadership Team and the Board’s Audit and health and safety of our people in all impacted and, through regular reporting, ensures that Risk Committee. This quarterly overview countries. We also implemented several risk visibility is provided to the Executive includes risk mitigation approaches such previously developed contingency plans Leadership Team and our Board. asinsurance coverage, and resilience tomaintain business operations asborder programmes such as fraud prevention restrictions and sanctions were announced. Risk and resilience in our business andcrisis management. On the 8th March 2022, The Coca-Cola units and markets Company (TCCC) announced that it is Risk sponsors and risk and insurance The role of the Board suspending its business in Russia. Atthe coordinators in every business unit facilitate The Board retains overall accountability time of publication the Group is working the continuous identification and assessment andresponsibility for the Group’s risk closely with TCCC to implement this of operational and emerging risks on a management and internal control systems, decision. In addition, economic sanctions country-by-country basis as set out in our has defined the Group’s risk appetite, and, imposed on Russia have had a significant ERM framework. through the Audit and Risk Committee, impact on foreign exchange rates and the This assessment is discussed at senior hasreviewed the effectiveness of these price of a number ofcommodities such as leadership team meetings every month and systems. During the year, the Board oil– which affects PET prices, and aluminum. risk registers, or lists of risks, are updated conducted a robust assessment of the Countersanctions imposed by Russia may accordingly. All risk registers are visible to principal and emerging risks, considering the have an impact onour Russian operations the Group’s Business Resilience Team who nature and extent of the principal risks that aswell as other countries inourterritory. review principal risks, emerging risks and key have the potential to impact the ability of the Weexpect the geopolitical environment trends, providing benchmarking for risks Group to achieve its strategic objectives, toremain volatile for some time. across the business. and reviewed its risk appetite statement to Related at least in part to the COVID-19 ensure that it remained not only aligned to Twice a year the Business Resilience Team, pandemic, global commodities showed a our objectives but supportive of our robust led by the CRO, hosts a business resilience great deal of volatility during the year putting ERM programme and internal control systems. conference where all risk sponsors and risk pressure on our suppliers as well as our and insurance coordinators are updated Our internal audit department conducts Company directly. The cost of most of the onkey trends and emerging risks across anannual independent review of the ERM key commodities critical to our business thebusiness. The CRO also facilitates a programme and its implementation, increased during the year. Aluminium, for discussion with the regional management assessing the Company’s processes and example, increased 40% as a result of supply teams and General Managers twice each their application against business best chain constraints and lower production year in key markets to discuss risk and practices and International Accounting globally. In addition, shortages of some resilience issues and trends, and to Standards. The Head of Corporate Audit ingredients and supplies during the year benchmark risks across the business. makes recommendations to improve the threatened to impact our operations. overall risk management programme, where At least once every other year, business units Thenumber of cyber‑attacks directed at required, with the findings submitted to the participate in an incident management and companies continued to rise in 2021 with Audit and Risk Committee of the Board. crisis resolution (IMCR) validation exercise. asignificant increase in ransomware attacks. Building on this review, the Board and its This includes participation in a crisis Committees also conduct annual reviews simulation based on a relevant business risk. 59INTEGRATED ANNUAL REPORT 2021 ### Risk management in action: To manage those health and safety risks Where consistent with legal requirements ## Managing health aswell as potential business disruptions, and government guidance, we actively ourGroup Incident Management and Crisis encouraged employees to be vaccinated. ## andsafety Resolution Team continued to monitor In Russia for example, governments ### We entered 2021 hoping caserates. mandated employees in certain industries, ### tosee a return to normal As depicted in the diagram below, we beverages being one, be fully vaccinated maintained weekly records of internal case orrisk closure of facilities. Through ### operations. However, rates against case rates in each market. communication campaigns and facilitation ### theCOVID-19 pandemic Wefocused on controlling and reducing of vaccination hubs, we met challenging ### continued to affect global transmission within our workplace and government deadlines without disruption ensuring our efforts to protect employees to our operations. ### business conditions and posed were effective. ### continuing health and safety We worked closely with The Coca-Cola ### risks to our people. Company to maintain additional safety protocols within our production facilities toprotect staff and the integrity of ourproduction. Country active cases per 100k vs Coca‑Cola HBC active/FTEs (16 November 2021) 1.81 1.78 1.8 1.75 1.75 1.61 1.60 1.6 1.44 1.4 1.33 1.26 1.2 | | 1.11 | 1.09 1.09 1.09 | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | 1.06 | 1.04 | | | | | | | | | | | | | 1.01 | 1.00 | 0.99 | | | | | 1.0 | | | | | | | | 0.95 0.95 | | | | | | | | | | | | | 0.90 0.90 | 0.88 | 0.85 0.82 0.81 0.78 0.8 0.74 0.67 0.63 0.6 0.4 0.24 | | 0.19 | | | | | | | | 0.20 | | | | | | | | | 0.20 | | | | | | | | | | 0.21 | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 0.2 | | 0.15 | 0.16 | | | | | | | | | | | | | | | | | | | 0.16 | | | | | | | 0.10 | | | | | | | | | | | | | | | | | | | | | | 0.10 | | | | 0.10 | | | | 0.12 | | | | | | | | | | | | | | | | 0.08 | | | | | | | | | | | | | | | 0.08 | | | 0.09 | | | | | | | | | | | | | 0.04 | | | | | 0.05 | 0.05 | 0.05 | | | | 0.06 | | | | | | | | | | | | | | | | | | 0.02 | | | | | | 0.03 | | | | | | | | | | | 0.20 | | | | | | | | | | | | 0.00 | 0.00 | 0.00 | | 0.00 | | | | 0.00 | | 0.00 | | | | | | 0.00 | | | | | 0.00 | | | | | 0.00 | 0.0 Italy Serbia Estonia Cyprus Croatia Latvia Austria Ireland Kosovo Poland Greece Ukraine Belarus Russia Nigeria Slovenia Lithuania Armenia Slovakia Hungary Bulgaria Romania Moldova Serbia Bambi Switzerland N. Macedonia Czech Republic Bulgaria BSS/BSO Average all countries Bosnia & Herzegovina Corporate Service Centre (CSC) % country active cases per 100K % active infection /FTEs increase from 9 November no change from 9 Novemberdecrease from 9 November Our treasury and procurement teams ## Resilient supply chain worked closely with our key suppliers tomanage costs and supply by: ### 2021 was a volatile year for • contracting volumes of key ingredients ### securing supply of key and packaging materials; ### ingredients, packaging and • expanding our supplier base by 2.0 ### services at a reasonable cost, introducing new/alternative suppliers; ### to maintain production and • securing raw materials for our suppliers to provide them with security of supply; ### serve our customers. and • hedging/fixing forward prices. We expect 2022 will be another challenging year due to ongoing shortages and increasing costs of certain raw materials, supply chain disruptions and logisticschallenges. We will continue to partner with our new and existing suppliers to minimise costs and disruptions. % country active cases per 100K and % active infection / FTEs 60 COCA-COLA HBC ### Managing risk and materiality continued We moved to strengthen our cyber-security notably including our commitment to ### Emerging risks programme through improving identity NetZero emissions by 2040. protection, securing an increasingly remote Employee health and engagement We made significant progress on our workforce and reducing vulnerabilities by quantitative assessment of climate change in new ways of working hardening our IT environment. In addition, risks with the development of our 2021 One of the outcomes of the COVID-19 we developed a cyber incident management water risk assessment (see page 71). pandemic has been a rise in the number and crisis resolution (IMCR) plan, fully Wateris fundamental to our business ofour people working from home. As home integrating our cyber response with our andclimate change will have a significant working or hybrid arrangements are well-established IMCR programme. The plan impacton the water sources that our local becoming more permanent, the Company was tested using simulations at business unit, communities and our business rely upon. has less direct control over the provision Group and Executive Leadership Team levels. | | The water risk assessment better enables | ofsafe and productive working conditions | | --- | --- | --- | | Many of our office-based employees | usto focus our investment and resources | aswe do in our office spaces. This increases | | continued to work from home in line with | on water priority areas for our long-term | the risk of occupational injuries impacting | | government guidelines and our processes | management plans to assure supply and | employee safety and our reputation as a | | for managing COVID-19 transmission risk. | business continuity. | caring, responsible employer; as well as | | In2021, the Company started to transition | | increased costs of lost time and potential | We continued to work to reduce and some offices to permanent flexible working compensation claims. manage plastic packaging waste. We believe arrangements enabling our employees, that, wherever possible, collection systems In addition, the risk of our people feeling attheir request, to continue to work from should be established at a national level. isolated and less engaged increases. home for at least part of their working week. Where effective systems don’t exist, we Thismay impact their mental health and Several policies and procedures were participate actively to support the set-up reduce the level of teamwork; and individual implemented to ensure a safe working and implementation of new packaging and group productivity which is critical to environment at home. As noted in the collection schemes. However, delivering this meeting one of our strategic Growth Pillars, Emerging Risks section, we will continue sort of meaningful change takes time and see ‘Cultivate the potential of our people’ tomonitor the impact of these new our progress has been incremental. pages 40-42. It may decrease our workingarrangements. attractiveness as an employer of choice A broader discussion on our climate-related In 2021, we saw government initiatives anddecrease our retention rates. It is critical risks, their link to materiality, and our risk aimed at introducing or increasing taxes in that our line managers have the right skills management approach is provided as part of anumber of areas relevant to our business. tosupport our people to stay connected our statement on implementing the In Poland for example, the introduction of a andengaged with the Company. We also recommendations of the Task Force on broad-based beverage tax had a significant need to utilize new technologies to Climate-related Financial Disclosures impact at a time when the business was supportproductive work, team building located on pages 66-67. already under pressure from input cost andengagement. One of the fallouts of the COVID-19 increases. Governments are increasingly pandemic was higher than normal turning to levying additional taxes to resignation rates reported by many respond to economic conditions, including companies – often referred to as the ‘Great increased debt levels, as well as public Resignation’. We maintained good retention concerns on matters such as the health rates (85% in 2021 vs 89% in 2020) although impact of sugar and single-use plastics. we did see challenges in certain employee Sustainability remained top of mind for our groups, primarily truck drivers and business business and our stakeholders in 2021, developers in some countries. ### Risk management in action Although CCHBC has considerable Majorinfrastructure projects including the ## Egypt in focus experience in working in emerging markets, construction of rail networks, roads and Egypt has a unique risk profile. We are bridges are also providing jobs and stability. ### In the second half of the year, working closely with the Egyptian team Our Egyptian business has a very robust ### the Company announced that tobetter understand the risks and security programme, led by an experienced ### it would acquire Coca-Cola opportunities inherent in the business and management team that will continue to share best risk management practices. ### Bottling Company of Egypt tomonitor the security environment and Coca-Cola HBC and CCBCE established a maintain effective mitigation programmes ### (CCBCE) and the acquisition joint integration management team in late to protect our people and our key assets. ### was completed inJanuary2022 2021 to ensure seamless transition of the Egyptian business into our ERM and IMCR Competitive environment programmes in 2022. As Egypt is one of the few countries intheworld where Coca-Cola does not Political and security context haveleading market share, we expect our After a number of tumultuous years, the primary competitors to be concerned current Egyptian government has been about the additional capability that very stable. The recent lifting of the state Coca-Cola HBC will bring to support an of emergency that had been in place since already successful business. We expect 2014 and a statement of support from the them to respond strongly. We are very IMF on its macroeconomic reforms are positive about the impact enhanced indicators of a positive outlook. 61INTEGRATED ANNUAL REPORT 2021 | We will continue to monitor the impact | A significant part of changes in retail is the | Our relationships with suppliers are critical | | --- | --- | --- | | ofnew working arrangements through | continuing growth of e-commerce. | for us to meet our sustainability objectives | | employee listening mechanisms, including | E-commerce provides exciting opportunities | as outlined in Growth pillar ‘Earn our licence | | regular employee surveys, as well as provide | for our company to enhance our relationship | to operate’ page 48 and ‘Fuel growth through | | support through our employee assistance | with customers and consumers that can | competitiveness and investment’ on pages | | programme and Mental Wellbeing policy, | drive revenue growth. In 2021 for example, | 35-36. To ensure that we are able to meet | | guidance and other support materials. | we more than quadrupled orders made on | increasing stakeholder and regulatory | | | our online customer portal to over 8% of | expectations, we will continue to build our | | Changing retail landscape | alltransactions. Our e‑Commerce sales | relationships with suppliers through initiatives | | The Covid-19 pandemic has had both | grew by 87%. | such as our supplier sustainability forums | | positive and negative impacts on retailers. | | aswell as greater engagement to ensure | As digital and e-commerce grows, We expect continuing changes as large more sustainable sourcing (e.g. training, joint competition from new entrants and existing retailers and buying groups grow and initiatives, joint sustainable goal setting etc.) industry competitors; or failing to invest consolidate, increasing their pricing power. sufficiently or implementing an effective In the longer term, many of our suppliers, This can lead to increasing pricing pressure digital commerce strategy could impact particularly in key agricultural ingredients on our business which could reduce ourrevenue growth. such as sugar and fruit juice, will be impacted ourprofits. by climate change. This could lead to Smaller retailers have continued to face Sustainable sourcing increased costs due to increased scarcity challenging economic conditions and in In the short to medium term, we expect orhaving to use alternative suppliers some cases the removal of government increasing environmental, social and oringredients. As part of our climate risk subsidies in some countries may have further corporate governance (ESG) due diligence assessment process, we are conducting negative impact on them. Our business is requirements across our supply chain, deeper assessments into the potential significantly dependent on smaller retailers including new directives such as the impact of climate change on our suppliers to deliver our products to consumers, EUMandatory Due Diligence regime. and the implications for our business. particularly in emerging markets. If smaller Whilewehave a good understanding of ESG Wewillcontinue working with our suppliers retailers don’t survive, we may lose part of performance in our larger suppliers, we to support them in setting and delivering animportant channel for delivering our mayincreasingly be held responsible for the science-based carbon reduction targets. products to consumers which could reduce actions or lack of compliance of suppliers our revenue. It is important that we continue deeper in our supply chain where we have to assist smaller retailers by helping them less visibility. This increases the amount build their capabilities and leveraging our ofmanagement time spent in due diligence growing e-Commerce expertise. and can lead to reputation risks, and fines aswell as additional costs in finding alternative suppliers. route-to-market and revenue growth tobring them in line with our sustainability management capabilities will have on our goals. CCHBC is committed to doing this as competitive position in the medium to part of our long-term sustainability strategy. longer term. Water | Economic conditions | Egypt is almost entirely dependent on the | | --- | --- | | Egypt has a relatively high inflation rate and | River Nile as its source of water. Ethiopia’s | | also imports ingredients paid in US dollars. | construction of the Great Renaissance | | Exchange rate fluctuations and inflation | Dam across the Blue Nile, which provides | | may affect the profitability of the business. | around 85% of the Nile’s water, has led to | | CCHBC has well developed capabilities to | tensions over water access. This is a key | | manage these uncertainties. | risk for Egypt. We remain optimistic that | the countries impacted, primarily Egypt, Sustainability Sudan and Ethiopia, will find a peaceful While the Coca-Cola business in Egypt long-term solution that will allow Egypt hasprioritised several key areas in its own tomeet its water needs into the future. sustainability strategy, such as packaging collection, community investment and water stewardship, there are other areas that will require focus and investment 62 COCA-COLA HBC ### Managing risk and materiality continued Principal risks Description Potential impact Key mitigations Link to material issues 1. Plasticsand Concerns related to packaging • Decreased credibility inpublicdiscussions • World Without Waste global vision • Packaging and waste waste and plastic pollution. • Long-term damage to our reputation and • Mission 2025 packaging-related commitments management packagingwaste licence to operate • Partnerships with local communities, NGOs, start-ups and academia to manage packaging recovery • Sustainable sourcing • Increased cost of doing business, including andminimise environmental impacts discriminatory taxes • Loss of consumer base 2. Changing retail The risk of significant changes to • Reduced availability of our portfolio andoverall • Prioritisation of assortment per channel to drive higher margin packs • Economic impact consumer purchasing behaviour profitability • Enhanced marketing campaigns to capture growing occasions of socialising at home accelerated environment and customer requirements. byCOVID‑19 restrictions • Refreshed and enhanced key account capabilities and tools to partner and grow profitable revenue withcustomers • Work closely with our out-of-home channel customers to drive transactions and support them selling online to more effectively manage the impact of COVID‑19, or in their reopening asrestrictions ease • Accelerate Right Execution Daily (RED) to support our commitment to operational excellence • Develop our digital and e‑commerce capabilities to capture opportunities associated with existing andnew distribution channels • Localised management plans in specific countries dependent on channel impact and risk and including variance in the impact of COVID-19 restrictions | 3. Commodity costs | The risk of raw material pricing | • Increased input costs | • Pricing volatility managed by Treasury/Procurement departments for hedgeable raw materials universe | | • Economic impact | | --- | --- | --- | --- | --- | --- | | | fluctuations, particularly resin, | | | through hedging/fixing of forward prices | • Sustainable sourcing | | | sugar, gasoil and aluminium. | | • Protocols are in place under the Treasury and Procurement Policies endorsed by the Board | | | • Reporting and visibility to the Financial Risk Management Committee and the Audit and Risk Committee • Recovery through pricing whilst maintaining growth, avoiding disruption and still being competitive 4. Product‑related The risk of governments imposing • Cost increases that cannot be passed on in • Focus on product innovation and expansion to a 24/7 beverage portfolio • Corporate citizenship taxes and regulatory changes such price • Expand our range of low- and no-calorie beverages • Responsible marketing taxes and regulatory as beverage taxes, sugar upper • Increased costs to meet additional regulatory changes • Proactive approach to better understand concerns undertaken by Corporate Affairs and Sustainability • Economic impact limits, sweetener restrictions, requirements inconjunction with our The Coca‑Cola Company counterparts. additional labelling requirements. • Brand and reputation damage • Country-specific response plans to address the specific localised nature of the risk. • Forced changes in the portfolio mix • Group strategy focusing on proactive and reactive advocacy with strategic plans, tax risk assessments, assetsrepository and targeted business unit support plans in place 5. Foreign exchange The risk of foreign exchange • Financial loss • Treasury policy requires, where possible, the hedging of 25% to 80% of rolling 12-month forecasted • Economic impact volatility and rate fluctuations • Increased cost base transactional foreign currency exposure fluctuations caused by uncertainty and • Hedging beyond 12 months may occur in exceptional cases subject to approval of Group CFO • Asset impairment complexity of macroeconomic • Limitations on cash repatriation • Derivative financial instruments are used, where available, to reduce net exposure to currency and commodity environment and geopolitical price fluctuations developments, exacerbated by COVID-19. 6. Cyber incidents A cyber attack or data centre • Financial loss • Implement a NIST-aligned cyber security and privacy control framework and monitor compliance • Economic impact failure resulting in business • Operational disruption • Safeguard critical IT and operational assets disruption, or breach of corporate • Damage to corporate reputation • Enhanced ability to detect, respond and recover from cyber incidents and attacks or personal data confidentiality. • Non-compliance with data protection • Foster a positive culture of cyber security legislation (e.g. GDPR) • Monitor threat landscape and remediate associated vulnerabilities • Cyber-related crisis management (IMCR) exercise with Executive Leadership Team 7. Geopolitical and Volatile and challenging • Safety of our people • Monitoring systems established with defined indicators to provide warning of escalation • Employee wellbeing Principal risks macroeconomic, security and • Disruptions to our operations • Security risk assessments developed on a country-by-country basis to inform robust security plans andengagement trend security environment geopolitical conditions. The risk • Economic impact • Financial impact of economic and • Business continuity programmes take into account risks associated with unrest and conflict and the Increasing ofcivil unrest and conflict with othersanctions impactofsanctions other countries. Stable • Continued development and training in IMCR programme Decreasing 8. Managing our The risks and opportunities • Opportunity to reduce costs and enhance • Approved science-based targets for 2030 and net zero commitment for 2040 • Climate change associated with reducing carbon relationships with key stakeholders through • Energy management programmes and transition to renewable and clean energy • Sustainable sourcing carbon footprint Risk included emissions along our value chain. increased use of renewable energy and in viability • Engagement and partnering with local and international stakeholders assessment newtechnologies • Focus on sustainable procurement • Reputation costs of not meeting our • Areas of risk monitored by country risk teams and specific tactical plans in place across the operations. Link to growth sustainability commitments pillars • Physical risk analysis including quantification and stress testing (consistent with TCFD requirements) • Costs associated with moving to low GHG andnatural disaster plans in place across the operations emissions, low-emission coolers, vehicles 1 2 3 • Review of Egyptian operations to understand impact on Group • Future carbon taxes 4 5 • Scarcity of resources impacting production 63INTEGRATED ANNUAL REPORT 2021 Principal risks Description Potential impact Key mitigations Link to material issues 1. Plasticsand Concerns related to packaging • Decreased credibility inpublicdiscussions • World Without Waste global vision • Packaging and waste waste and plastic pollution. • Long-term damage to our reputation and • Mission 2025 packaging-related commitments management packagingwaste licence to operate • Partnerships with local communities, NGOs, start-ups and academia to manage packaging recovery • Sustainable sourcing • Increased cost of doing business, including andminimise environmental impacts discriminatory taxes • Loss of consumer base 2. Changing retail The risk of significant changes to • Reduced availability of our portfolio andoverall • Prioritisation of assortment per channel to drive higher margin packs • Economic impact consumer purchasing behaviour profitability • Enhanced marketing campaigns to capture growing occasions of socialising at home accelerated environment and customer requirements. byCOVID‑19 restrictions • Refreshed and enhanced key account capabilities and tools to partner and grow profitable revenue withcustomers • Work closely with our out-of-home channel customers to drive transactions and support them selling online to more effectively manage the impact of COVID‑19, or in their reopening asrestrictions ease • Accelerate Right Execution Daily (RED) to support our commitment to operational excellence • Develop our digital and e‑commerce capabilities to capture opportunities associated with existing andnew distribution channels • Localised management plans in specific countries dependent on channel impact and risk and including variance in the impact of COVID-19 restrictions | 3. Commodity costs | The risk of raw material pricing | • Increased input costs | • Pricing volatility managed by Treasury/Procurement departments for hedgeable raw materials universe | | • Economic impact | | --- | --- | --- | --- | --- | --- | | | fluctuations, particularly resin, | | | through hedging/fixing of forward prices | • Sustainable sourcing | | | sugar, gasoil and aluminium. | | • Protocols are in place under the Treasury and Procurement Policies endorsed by the Board | | | • Reporting and visibility to the Financial Risk Management Committee and the Audit and Risk Committee • Recovery through pricing whilst maintaining growth, avoiding disruption and still being competitive 4. Product‑related The risk of governments imposing • Cost increases that cannot be passed on in • Focus on product innovation and expansion to a 24/7 beverage portfolio • Corporate citizenship taxes and regulatory changes such price • Expand our range of low- and no-calorie beverages • Responsible marketing taxes and regulatory as beverage taxes, sugar upper • Increased costs to meet additional regulatory changes • Proactive approach to better understand concerns undertaken by Corporate Affairs and Sustainability • Economic impact limits, sweetener restrictions, requirements inconjunction with our The Coca‑Cola Company counterparts. additional labelling requirements. • Brand and reputation damage • Country-specific response plans to address the specific localised nature of the risk. • Forced changes in the portfolio mix • Group strategy focusing on proactive and reactive advocacy with strategic plans, tax risk assessments, assetsrepository and targeted business unit support plans in place 5. Foreign exchange The risk of foreign exchange • Financial loss • Treasury policy requires, where possible, the hedging of 25% to 80% of rolling 12-month forecasted • Economic impact volatility and rate fluctuations • Increased cost base transactional foreign currency exposure fluctuations caused by uncertainty and • Hedging beyond 12 months may occur in exceptional cases subject to approval of Group CFO • Asset impairment complexity of macroeconomic • Limitations on cash repatriation • Derivative financial instruments are used, where available, to reduce net exposure to currency and commodity environment and geopolitical price fluctuations developments, exacerbated by COVID-19. 6. Cyber incidents A cyber attack or data centre • Financial loss • Implement a NIST-aligned cyber security and privacy control framework and monitor compliance • Economic impact failure resulting in business • Operational disruption • Safeguard critical IT and operational assets disruption, or breach of corporate • Damage to corporate reputation • Enhanced ability to detect, respond and recover from cyber incidents and attacks or personal data confidentiality. • Non-compliance with data protection • Foster a positive culture of cyber security legislation (e.g. GDPR) • Monitor threat landscape and remediate associated vulnerabilities • Cyber-related crisis management (IMCR) exercise with Executive Leadership Team 7. Geopolitical and Volatile and challenging • Safety of our people • Monitoring systems established with defined indicators to provide warning of escalation • Employee wellbeing macroeconomic, security and • Disruptions to our operations • Security risk assessments developed on a country-by-country basis to inform robust security plans andengagement security environment geopolitical conditions. The risk • Economic impact • Financial impact of economic and • Business continuity programmes take into account risks associated with unrest and conflict and the ofcivil unrest and conflict with othersanctions impactofsanctions other countries. • Continued development and training in IMCR programme 8. Managing our The risks and opportunities • Opportunity to reduce costs and enhance • Approved science-based targets for 2030 and net zero commitment for 2040 • Climate change associated with reducing carbon relationships with key stakeholders through • Energy management programmes and transition to renewable and clean energy • Sustainable sourcing carbon footprint emissions along our value chain. increased use of renewable energy and • Engagement and partnering with local and international stakeholders newtechnologies • Focus on sustainable procurement • Reputation costs of not meeting our • Areas of risk monitored by country risk teams and specific tactical plans in place across the operations. sustainability commitments • Physical risk analysis including quantification and stress testing (consistent with TCFD requirements) • Costs associated with moving to low GHG andnatural disaster plans in place across the operations emissions, low-emission coolers, vehicles • Review of Egyptian operations to understand impact on Group • Future carbon taxes • Scarcity of resources impacting production 64 COCA-COLA HBC ### Managing risk and materiality continued Principal risks Description Potential impact Key mitigations Link to material issues 9. Wateravailability The risks related to water • Lack of water for local communities which • Identification and implementation of water stewardship programmes in water priority locations • Water stewardship availability, water stress and water diminishes our licence to operate and damages tomitigateshared water risks • Sustainable sourcing andusage quality in our areas of operation, our brand reputation • Alliance for Water Stewardship certification for all plants exacerbated by the effects of • Insufficient water or increased costs to • Source vulnerability assessment for all plants climate change and excessive manufacture our products • Implement water usage reduction plans water consumption in a catchment area leading to unsustainable water availability. | 10. Health and safety | The risk to the health and safety | • Fatalities and/or serious injury and illness | | • Deployment of Behaviour Based Safety (BBS) programmes | • Employee wellbeing and | | | --- | --- | --- | --- | --- | --- | --- | | | ofour people as a result of | | ofemployees, contractors, third parties and | • End-to-End (E2E) contractor management process | | engagement | | | occupational workplace accidents, | | members of the public | | | | • Health and Safety Board to continue incidents and illnesses (including • Business continuity for people being absent • The Coca‑Cola Company lifesaving rules in place and incorporated in CCHBC Baseline COVID-19 management). from work due to infection or self-isolation due Assessmentprogramme to COVID-19 • COVID-19 pandemic protocols in place across the entire organisation and reviewed regularly • Mental wellbeing of our people • Business continuity plans updated and tested • Regular country and System lessons learned shared across the entire organisation • Increased focus on mental wellbeing in Employee Assistance Programme | 11. People retention | Inability to attract, retain and | • Failure to achieve our growth plans | • Upgrade our Employer Value Proposition and Employer Brand | | • Employee wellbeing and | | | --- | --- | --- | --- | --- | --- | --- | | | engage sufficient numbers | | • Develop leaders and people for key positions internally, improve leaders’ skills and commitment to | | | engagement | | | ofqualified and experienced | | | talentdevelopment | • Human rights, diversity | | | | employees in highly competitive | | | | | andinclusion | • Continuous employee listening to address culture and engage effectively talent markets. • Promote an inclusive environment that allows all employees to achieve their full potential • Corporate citizenship • Create shared value with the communities in which we work to ensure we are seen and considered asanethical business with an attractive purpose • Expand talent pool by hiring more diverse workforce 12. Suppliers and Inability to secure supply of key • Production disruptions • Contracted volumes of key ingredients and packaging materials • Economic impact ingredients, packaging and • Increased input costs • Contracted prices when feasible • Sustainable sourcing sustainable sourcing services at a reasonable cost • Ensure hedgeable contracts because of supply-demand • Expand supplier base and introduce new/alternative suppliers imbalances and/or crop yields. • Secure raw materials for suppliers to provide security of supply 13. Ethics and The risk of fraud against the • Damage to our corporate reputation • Annual ‘Tone from the Top’ messaging • Corporate governance Company as well as risk of • Significant financial penalties • Code of Business Conduct, ABAC and commercial compliance training and awareness campaigns for compliance anti‑bribery and corruption (ABAC) ourentire workforce and training on international sanctions for our employees exposed to this risk • Management time diverted to resolving fines or sanctions if our legalissues • All third parties that we engage must comply with our Supplier Guiding Principles, which include ABAC employees, or the third parties we • Economic loss because of fraud andinternational sanctions compliance engage to deal with governments, andreputational damages, fines andpenalties, • All third parties that we engage to deal with governments on our behalf are subject to ABAC due diligence. fail to comply with ABAC in the event ofnon‑compliance Screening of third parties and transactions potentially exposed to international sanctions risk requirements. The risk of • Cross-functional joint task force in Nigeria that proactively addresses risks in our key operations inadvertent non-compliance with • Risk-based internal control framework and assurance programme with local management accountability international sanctions in certain Principal risks • Periodic risk‑based internal audits of ABAC compliance programme countries. trend • Speak Up! hotline Increasing 14. Quality The risk of serious product quality • Illness to consumers • Full implementation of CCHBC Quality and Food Safety prevention programmes • Product quality issues or contamination of our • Reputation damage • Quality and Food Safety management system certification. Stable products. • Regulatory intervention • Quality and Food Safety capabilities development programmes implementation as part of Maturity Decreasing • Adverse financial impact Matrixprogramme • Elevated supplier quality management Risk included • Continued development and training in IMCR programme in viability assessment 15. Strategic We rely on our strategic • Termination of agreements or unfavourable • Management focus on effective day‑to‑day interaction with our strategicpartners • Economic impact relationships and agreements renewal terms could adversely affect • Working together as effective partners for growth • Corporate governance stakeholder Link to growth withThe Coca‑Cola Company profitability relationships • Engagement in joint projects and business planning with a focus onstrategicissues pillars (including Costa Coffee), Monster • Participation in ‘top-to-top’ senior management forums Energy and ourpremium 1 2 3 spiritspartners. 4 5 65INTEGRATED ANNUAL REPORT 2021 Principal risks Description Potential impact Key mitigations Link to material issues 9. Wateravailability The risks related to water • Lack of water for local communities which • Identification and implementation of water stewardship programmes in water priority locations • Water stewardship availability, water stress and water diminishes our licence to operate and damages tomitigateshared water risks • Sustainable sourcing andusage quality in our areas of operation, our brand reputation • Alliance for Water Stewardship certification for all plants exacerbated by the effects of • Insufficient water or increased costs to • Source vulnerability assessment for all plants climate change and excessive manufacture our products • Implement water usage reduction plans water consumption in a catchment area leading to unsustainable water availability. | 10. Health and safety | The risk to the health and safety | • Fatalities and/or serious injury and illness | | • Deployment of Behaviour Based Safety (BBS) programmes | • Employee wellbeing and | | | --- | --- | --- | --- | --- | --- | --- | | | ofour people as a result of | | ofemployees, contractors, third parties and | • End-to-End (E2E) contractor management process | | engagement | | | occupational workplace accidents, | | members of the public | | | | • Health and Safety Board to continue incidents and illnesses (including • Business continuity for people being absent • The Coca‑Cola Company lifesaving rules in place and incorporated in CCHBC Baseline COVID-19 management). from work due to infection or self-isolation due Assessmentprogramme to COVID-19 • COVID-19 pandemic protocols in place across the entire organisation and reviewed regularly • Mental wellbeing of our people • Business continuity plans updated and tested • Regular country and System lessons learned shared across the entire organisation • Increased focus on mental wellbeing in Employee Assistance Programme | 11. People retention | Inability to attract, retain and | • Failure to achieve our growth plans | • Upgrade our Employer Value Proposition and Employer Brand | | • Employee wellbeing and | | | --- | --- | --- | --- | --- | --- | --- | | | engage sufficient numbers | | • Develop leaders and people for key positions internally, improve leaders’ skills and commitment to | | | engagement | | | ofqualified and experienced | | | talentdevelopment | • Human rights, diversity | | | | employees in highly competitive | | | | | andinclusion | • Continuous employee listening to address culture and engage effectively talent markets. • Promote an inclusive environment that allows all employees to achieve their full potential • Corporate citizenship • Create shared value with the communities in which we work to ensure we are seen and considered asanethical business with an attractive purpose • Expand talent pool by hiring more diverse workforce 12. Suppliers and Inability to secure supply of key • Production disruptions • Contracted volumes of key ingredients and packaging materials • Economic impact ingredients, packaging and • Increased input costs • Contracted prices when feasible • Sustainable sourcing sustainable sourcing services at a reasonable cost • Ensure hedgeable contracts because of supply-demand • Expand supplier base and introduce new/alternative suppliers imbalances and/or crop yields. • Secure raw materials for suppliers to provide security of supply 13. Ethics and The risk of fraud against the • Damage to our corporate reputation • Annual ‘Tone from the Top’ messaging • Corporate governance Company as well as risk of • Significant financial penalties • Code of Business Conduct, ABAC and commercial compliance training and awareness campaigns for compliance anti‑bribery and corruption (ABAC) ourentire workforce and training on international sanctions for our employees exposed to this risk • Management time diverted to resolving fines or sanctions if our legalissues • All third parties that we engage must comply with our Supplier Guiding Principles, which include ABAC employees, or the third parties we • Economic loss because of fraud andinternational sanctions compliance engage to deal with governments, andreputational damages, fines andpenalties, • All third parties that we engage to deal with governments on our behalf are subject to ABAC due diligence. fail to comply with ABAC in the event ofnon‑compliance Screening of third parties and transactions potentially exposed to international sanctions risk requirements. The risk of • Cross-functional joint task force in Nigeria that proactively addresses risks in our key operations inadvertent non-compliance with • Risk-based internal control framework and assurance programme with local management accountability international sanctions in certain countries. • Periodic risk‑based internal audits of ABAC compliance programme • Speak Up! hotline 14. Quality The risk of serious product quality • Illness to consumers • Full implementation of CCHBC Quality and Food Safety prevention programmes • Product quality issues or contamination of our • Reputation damage • Quality and Food Safety management system certification. products. • Regulatory intervention • Quality and Food Safety capabilities development programmes implementation as part of Maturity • Adverse financial impact Matrixprogramme • Elevated supplier quality management • Continued development and training in IMCR programme 15. Strategic We rely on our strategic • Termination of agreements or unfavourable • Management focus on effective day‑to‑day interaction with our strategicpartners • Economic impact relationships and agreements renewal terms could adversely affect • Working together as effective partners for growth • Corporate governance stakeholder withThe Coca‑Cola Company profitability relationships • Engagement in joint projects and business planning with a focus onstrategicissues (including Costa Coffee), Monster • Participation in ‘top-to-top’ senior management forums Energy and ourpremium spiritspartners. 66 COCA-COLA HBC ### Managing risk and materiality continued Access to good-quality water, a key TheChiefRisk Officer provides the Executive ingredient in our products, is critical for the Leadership Team (ELT) and the Audit and ## Managing | | sustainability of our business as well as for | Risk Committee with quarterly updates | | --- | --- | --- | | | the communities where we operate. | ofthese risks. | | climate | In 2021, we enhanced our understanding | At management level, climate-related | | | ofclimate‑related risks by conducting a | matters are supervised by the ELT which | | | comprehensive quantitative assessment | includes the Chief Corporate Affairs and | | change risk | ofwater risk (see Managing water risk across | Sustainability Officer. Led by the Chief | | | our territory on page 71). We will continue | Executive Officer, the ELT has responsibility | | | torefine our water risk assessment annually. | for reviewing the assessment of the impact | ### Assessment and mitigation In 2022, we will also build on our experience of climate-related risks and opportunities, ### ofclimate‑related risk is in quantitative climate risk assessments by the development of long-term strategies ### integrated into our enterprise adding an assessment of risks associated tomanage the impact of climate change, the with carbon emissions. setting of annual targets and the approval of ### risk management programme, annual business plans which form the basis Our response to climate change transcends ### which underpins our robust, of the Company performance management. all areas of our strategy and operations and, ### risk-based approach to the The ELT meets on a monthly basis and as a result, our TCFD disclosures can be reviews the performance of the Company, ### physical and transitional risks found throughout this report. The table including progress against the Group’s onpage 67 explains where our disclosures ### associated with climate change. strategic pillars, in which climate-related on climate change can be found in this issues and their impact are embedded, as We analyse our internal data and work with report and how the information aligns to well as, progress against the Group’s climate recognised specialist agencies, our theTCFDrecommendations. goals and targets. insurance brokers and insurers to obtain For additional information on our climate- regional analysis of climate science. We have also established a cross-functional related disclosures, CCHBC makes an Thishelps us make informed decisions and working group with experts from different extensive, annual submission to the global improves our understanding of the potential functions (Risk, Procurement, Finance, environmental disclosure organisation,CDP. climate vulnerabilities in our operations Environment, Supply Chain, Engineering, Our 2021 submission is publicly available at: andthe communities in which we operate. Sustainability) who have been studying 2021 CDP Climate response Thisdata and resulting analysis is shared different climate scenarios and assessing across our business units, supporting Due to the size of this disclosure document, qualitatively and quantitatively the risks and climate resilience across our planning we do not include the full submission here. opportunities inherent in those scenarios. andoperations. Arelated cross‑functional group has been Governance of climate‑related working to develop our science-based At Coca‑Cola HBC, we believe that the risks and opportunities carbon reduction targets and our recommendations of the Task Force To ensure that climate-related risks and NetZeroby40 goal and plans. They meet onClimate‑related Financial Disclosures opportunities are given the highest level regularly (at least monthly) and present their (TCFD) are an important step in the ofoversight and are embedded into the work to the ELT. establishment of a framework for reporting strategy and mission of our Company, climate-related risks and their financial ourassessment and management of the Strategy and risk management impacts. We support efforts to improve potential impact of climate change is Climate-related risks and opportunities are thequality and consistency of disclosures, supervised by Board’s Social Responsibility assessed as part of our well-established having been a leader in the field with our first Committee (SRC). enterprise risk management programme carbon reduction commitments in 2006 and and our approach to managing our principal an early adopter of science-based targets. The SRC is responsible for establishing the risks is holistic and integrated. The impact of principles governing environment, climate The Board continues to have oversight climate change and emissions are linked to impact and water security management; ofclimate‑related risks and opportunities our water stewardship, sustainable sourcing andfor ensuring effective processes and through the activities of the Social and packaging waste agendas. In our Mission systems are in place to implement our Responsibility Committee and the Audit 2025 sustainability commitments, climate sustainability strategy. The SRC regularly andRisk Committee. The Coca‑Cola System, change and emissions reduction, water reviews the Group’s performance in achieving including Coca‑Cola HBC, has identified stewardship and water use reduction, environment, climate, water and socially eight material risks relating to the physical ingredient sourcing, and packaging waste, relevant goals and ensures that sustainability and transitional impact of climate change together contribute to four of our total six and climate objectives are fully integrated onour business. sustainability pillars. into the Group’s business strategy. These are depicted in the diagram on page 70. We consider all risks, including climate- The Chief Corporate Affairs and Sustainability The eight risks are linked to Principal risks related risks, over a range of timeframes Officer provides regular updates to the SRC ‘’Plastics and packaging waste’ and ‘Managing andthese are integrated into our business on the Group’s progress. our carbon footprint’ see page 62; and ‘Water planning processes. Short-term risks The assessment and management of availability and usage’ and ‘Suppliers and (1‑2years) are linked with Company climate-related risks and opportunities sustainable sourcing’ page 64. business planning yearly cycles; mid‑term areintegrated into the Group’s enterprise risks (3‑5years) are linked with our strategic Water scarcity is classified as a physical risk risk management process, see page 58. planning process; and long‑term risks while the potential impact of changing water TheBoard’s Audit and Risk Committee (6‑10years) are linked with our long‑term regulations is classified as a transitional risk. oversees all business risks, including planning process. environmental and climate risks. 67INTEGRATED ANNUAL REPORT 2021 As part of our ERM programme, our risk business, strategy and financial planning appropriate employees. We have introduced assessments include an assessment of the inthe whole value chain and identified eight carbon reduction in the whole value chain as likelihood of the risk eventuating and the risks are disclosed on the next pages. part of the long-term incentive plan (LTIP) impact of a variety of factors including health for managers eligible for that plan. Incentives for meeting our Mission 2025 and safety, financial impact, damage to sustainability goals are part of the reputation and brands, business compensation for members of the ELT. interruption, and management effort. Targets related to energy usage, emissions Details of our analysis of climate-related reduction, water usage, sourcing and risks and opportunities on the Group’s packaging are linked to annual bonuses for Location of TCFD aligned disclosures Governance: Disclose the Company’s governance around climate‑related risks Compliance status andopportunities a) Describe the Board’s oversight of a) Fully consistent climate-related risks and opportunities Social Responsibility Committee, pages 116-117 b) Describe management’s role in identifying, Audit and Risk Committee, pages 108-111 b) Fully consistent assessing and managing climate-related risks Risk and materiality, pages 56‑65; and opportunities Managing climate change risk, pages 66, 68-70 Strategy: Disclose the actual and potential impacts of climate‑related risks andopportunities on the Company’s business, strategy and financial planning wherematerial a) Describe the climate-related risks a) Fully consistent andopportunities that the organisation hasidentified over the short, medium Material issues, pages 56‑57; Principal risks, pages 62‑65 andlongterm 2021 CDP Climate response, pages 14-21 b) Describe the impact of climate-related risk Principal risks, pages 62-65 b) Work in progress – qualitative impact has and opportunity on the Company’s business, been completed for the whole value chain; Earn our licence to operate, pages 44-51 strategy and financial planning however, more work will be done on 2021 CDP Climate response, pages 21-37, 40-44 understanding the quantitative impact on business strategy and financial planning. Weexpect this work to be completed by end2022. c) Describe the resilience of the Managing climate change risk, pages 66, 68-70 c) Work in progress – work has been done organisation’sstrategy considering different withtwo scenarios related to physical and 2021 CDP Climate response, pages 38-44 climate‑relatedscenarios, including a transitional risks associated with the impact Managing water risk across our territory, page 71 2‑degree or lowerscenario on water availability and costs. More work will be done on the impact of other elements of climate change. We expect this work to be completed byend 2022. Risk management: Disclose how the Company identifies, assesses and manages climate‑related risks and opportunities a) Describe the Company’s process for a) Fully consistent identifying and assessing climate-related risks and opportunities Risk and materiality, pages 56-65 b) Describe the Company’s process Principal risks, pages 62-65 b) Fully consistent formanaging climate‑related risks Key performance indicators, pages 47, 50, 54-55 andopportunities 2021 CDP Climate response, pages 13-21 Managing climate change risk, pages 66-71 c) Describe how these processes Risk and materiality, pages 56-65 c) Fully consistent areintegrated into the overall risk managementprogramme Metrics and targets: Disclose the metrics and targets used to assess and manage climate‑ related risks and opportunities | a) Disclose the metrics used by the | | a) Work in progress. We have well-defined | | --- | --- | --- | | organisation to assess climate-related risks | | metrics on the impact of climate change on | | and opportunities in line with its strategy | NetZeroby40 target across the whole value chain, page 46 | water and transition risk of carbon price, but | | andrisk management process | Charts on page 47 with all Scopes | other elements are largely qualitative at this | stage. We expect this work to be completed b) Disclose Scope 1, Scope 2, and, if Mission 2025 commitments reated to the following pillars: by end 2022. | appropriate, Scope 3 greenhouse gas (GHG) | climate and renewable energy, water reduction and | | | --- | --- | --- | | emissions, and the related risks | stewardship and Word Without Waste on pages 54-55 | b) Fully consistent | | c) Describe the targets used by the | 2021 GRI Content Index, Environmental table, pages 38-40 | c) Fully consistent. Our Mission 2025 | | organisation to manage climate-related risks | | commitments, approved science-based | | and opportunities and performance | | targets and NetZeroby40 commitment | | againsttargets | | provide clear targets. | 68 COCA-COLA HBC ### Managing risk and materiality continued Physical risks are those caused by higher ### Physical risks concentrations of greenhouse gases in the atmosphere, which in turn lead to higher average temperatures, more acidic oceans, changing weather patterns and rising sealevels. Extreme weather and changing weather andprecipitation patterns can impact our business in the following ways: | 1. Disruption to | 2. Disruption to | 3. Reduced ability | 4. Impact on the | | --- | --- | --- | --- | | manufacturing from | distribution caused by | toproduce as result | costandavailability | | extreme weather | extreme weather | ofwaterscarcity | ofingredients | | Extreme weather events | Extreme weather may impact | Access to water is fundamental | We continue to assess the | | including floods and storms can | key transport and logistics | to our business and to the | impact of climate change on | | disrupt and/or damage our | routes and reduce access to | communities we operate in. | theavailability, quality and price | | manufacturing facilities leading | ourfleets. This may impact our | | of key ingredients as part of our | We have assessed the impact to an inability to supply products ability to distribute our products assessment of Principal risk that climate change may have to our customers and significant to markets as well as the safety ‘Suppliers and sustainable on the cost and availability of costs associated with repairs. of our employees and sourcing’. water both for our needs and Itcan also lead to injuries to contractors. the needs of the local This impact is due primarily to ourpeople. We assess the risk of business communities that we operate predicted changes to weather We assess the risk of business interruption from a range of within as part of our assessment and precipitation patterns. interruption from a range of causes as part of our strategic of Principal risk ‘Water availability Whilewe are currently seeing causes as part of our strategic and operational risk reviews. and usage’, changes in weather patterns and operational risk reviews. Wecurrently mitigate the that have been attributed to Anumber of our plants are Wecurrently mitigate the financial costs through our climate change, and expect located in areas that are or will financial costs of extreme insurance programme as well those changes to continue, be facing water challenges. weather events through our asuse of third‑party logistics wehave not identified a direct These plants are referred to as property damage insurance providers. We have also impact on our business at this ‘water priority’ plants. programme. This includes established a robust business stage. We therefore consider annual surveys of our facilities continuity programme that During the year, we conducted this a longer term risk. byexternal risk engineers. includes management of an extensive quantitative During the year, we continued Wehave also established a extreme weather to protect our assessment of the impact of toassess the ability of our robust business continuity people and to minimise losses. two different climate scenarios suppliers and alternative | programme to prevent and | | on the availability and cost of | | | --- | --- | --- | --- | | | While we have seen an increase | | suppliers to continue to supply | | minimise losses. During the year, | | water by 2030 and 2040. | | | | in the number of extreme | | key ingredients at the quality, | | we carried out additional | | Thisassessment is outlined | | | | events such as storms and | | quantity and cost that we expect | | assessments of plants and | | onpage 71. | | | | bushfires that have been | | under different conditions. | warehouses at risk due to attributed to climate change, As noted in this assessment, extreme weather. While there Moving forward, we will wehave not identified a direct wedo expect climate change to has been an increase in the undertake further work to impact on our distribution have an impact on our business number of extreme weather assess how our suppliers may be systems at this stage but we do over the longer term. events that have been attributed impacted by changes in weather expect this risk to increase over to climate change, we have not and precipitation patterns under the longer term. | identified a direct impact on our | | different climate scenarios. | | --- | --- | --- | | manufacturing at this stage and | In 2022, we will include projected | | | consider this a longer term risk. | data using at least two different | | climate scenarios to enhance We recognise that much of the our understanding of the data we currently use in our potential impact on our assessments is based on distribution system. historical information. In 2022, we will include projected data using at least two different climate scenarios to enhance our understanding of the potential impact on our manufacturing. 69INTEGRATED ANNUAL REPORT 2021 The physical effects of climate change The transition to a low-carbon economy ### Transition risks willbe limited if action is takento force a also presents a number of opportunities transition to a low-carbon economy. This will forour business. Our investments in new require regulatory, market and technological technologies not only help us meet the changes. The speed and severity of these expectations of key stakeholders to do our changes will have an impact on our business. part to reduce carbon emissions, but they Afaster and more aggressive approach by also present opportunities for significant governments, for example, will have a more cost savings. significant financial impact than a more gradual approach. | 5. Increased costs across | 6. Increased cost | 7. Increased costs | 8. Damage to the | | --- | --- | --- | --- | | our value chain from | ofpackaging | anddisruptions due | reputation of the | | GHGregulations | | towater regulations | beverage sector | | Our business emits greenhouse | Our business uses various types | As noted in Physical risk #3, | We are reliant on the brand | | gases (GHGs) across our value | of packaging materials and | water is fundamental to our | valueand positive reputation | | chain. Actions to introduce | delivery methods with different | business. We continually assess | ofCoca‑Cola. Consumer | | carbon pricing could | carbon footprints. Regulations | the impact of changes to the | perceptions of the beverage | | increasecosts of packaging, | designed to decrease the use | cost ofwater or placement | sector as a contributor to | | manufacturing, distribution and | ofpackaging materials that | ofrestrictions on the availability | climate change may impact the | | cold drink equipment over the | contribute to GHG emissions | ofwater as part of the | reputation of our business and | | medium term. | could increase our costs. | assessment of Principal risk | brands and ultimately demand | | | Wearealready starting to see | ‘Water availability and usage’. | for our products. | During the year, we assessed governments considering These changes may impact our the impact of changing GHG In addition, being seen as part additional taxes on single use ability to produce or increase the regulations as part of our ofthe problem leads to the plastics. This risk is therefore cost of production over the assessment of Principal risk targeting of the beverage sector considered a short to medium medium to longer term. ‘Managing our carbon footprint’. for new and/or increasing term risk. | We assessed the operational | | We are reducing our water | climate-related taxes. We | | --- | --- | --- | --- | | costs of carbon taxes on direct | We include an assessment of | usage across our business and, | constantly monitor the | | emissions and capital | the risk of increased cost of | as part of our Mission 2025 | likelihood and impact of these | | expenditures needed to reduce | packaging resulting from climate | sustainability commitments, | changes as part of our | | our carbon emissions based | change as part of our | have committed to a 20% | assessment of Principal risk | | ona1.5ºC warming scenario. | assessment of Principal risk | reduction in water usage in our | ‘Product-related taxes and | | InDecember 2020, wereceived | ‘Plastics and packaging waste’. | water priority plants. We are also | regulatory changes’. As some | | an approval of our carbon | | closely monitoring the potential | ofour countries have introduced | During the year, we continued to reduction targets by the Science for additional taxes, levies or or are actively considering introduce more innovative ways Based Targets initiative and we restrictions in the availability introducing additional taxes, to reduce packaging. As part are committed to reducing our ofwater. weconsider this to be a ofour World Without Waste Scope 1 and 2 emissions by 55% short‑termrisk. initiative, we are making In 2021, we conducted an by 2030 vs 2017 and our Scope concerted efforts to increase extensive quantitative Our Mission 2025 sustainability 3 emissions by 21% for the the amount of recyclable assessment of the impact of commitments and strong same period. | | packaging across our | two different climate scenarios | cultural commitment to being | | --- | --- | --- | --- | | In 2022, we will extend our | operations, use more recycled | on the availability and cost of | acontributor to the solutions to | | quantitative analysis of the | PET and refillable packaging | water across our business by | climate change are designed to | | impact of climate change to | andhelp collect the packaging | 2030 and 2040. Shorter-term | take advantage of opportunities | | include the financial impact of | materials we place on the | transitional costs were | associated with those changes, | | managing our carbon footprint. | market. | considered as part of that | protect our business and | | | | assessment. For further | protect our reputation as a | | | | information on our water risk | responsibleCompany. | assessment, see page 71. 70 COCA-COLA HBC ### Managing risk and materiality continued ### The impact of climate change risk The Coca-Cola Company and its global bottling partners, including Coca‑Cola HBC, have identified eight material risks relating to the physical and transitional impact of climate change on our business and these are depicted in the following diagram. For more details on these eight risks, please see previous pages 68 and69, where the colour codes of the risks reflect the diagram below. Cause Risk Agriculture and Packaging Manufacturing Distribution Cold drink Customers and ingredients equipment communities Estimated share of carbon emissions ## 25% 31% 11% 6% 27% Business impacts: Physical risks of climate change Changes to Limits availability weather and of ingredients precipitation and raw patterns materials Extreme Disrupts weather production events Disrupts/limits distribution Water Disrupts/limits scarcity production Business impacts: Risks of transition to a low‑carbon economy GHG Increases cost regulation ofpackaging materials Increases cost of manufacturing, distribution and cold drink equipment Changes to Reputational risk consumer perceptions Water Disrupts/limits regulation production 71INTEGRATED ANNUAL REPORT 2021 The additional increase in water utilization Pessimistic climate scenario ## Managing water risk rates, converted into water volume, was The pessimistic scenario used in our analysis 1 multiplied by the ‘true cost of water’ to represents a world with uneven economic ## across our territory | | provide an estimate of the financial impact | development, including higher population | | --- | --- | --- | | In 2021, we conducted a | of both increased production demand and | growth but lower GDP growth. Globally, | | | climate change. For plants in water-stressed | carbon emissions continue to rise and | ### detailed assessment of the areas – our water priority plants – the cost of average temperature rises between 2.6 ### impact of climate change on replenishing the watershed based on water and4.8 degrees (RCP8.5). ### the availability and cost of water withdrawal was added. As with the optimistic scenario, our facilities ### across all of our markets under We estimated the additional operating in Armenia, Bulgaria, Greece, Cyprus, Russia, expense required for each plant to meet Italy and Nigeria would be located inwater‑ ### different climate scenarios. additional water needs, as well as one-off risk areas under the pessimistic scenario. We recognise that we have a responsibility CapEx requirements where appropriate to By 2030, average baseline water stress is over and above meeting our production support our risk mitigation programme. expected to increase by 27%. We estimate needs. Access to clean water is a In general terms, our assessment indicated our annual water costs to meet our fundamental human right and we are that climate change is not likely to increase production needs as well as replenish the committed to ensuring water security for the number of plants assessed as water local watersheds in our water priority areas local communities as well as our business priority plants in our existing territory, will increase by 45% over and above our inareas of water stress. although it is expected to increase the level baseline costs. Additional one-off CapEx Climate change is expected to increase of water stress in those areas. Climate costs in the lead-up to 2030 of €30million thelevel of water stress in a number of our change is unlikely to impact the useful will be required. countries, making water scarcer and more economic life of any of our plants; however By 2040, average baseline water stress is valuable in those countries. This means that we will need to invest in additional water expected to increase by 46%. We estimate our costs will increase, both to meet the infrastructure to meet our needs as well as our annual water costs to meet our needs of our business but also to ensure maintain our commitments to replenish the production needs as well as replenish the wecan replenish the watersheds in those local watershed in water priority areas. local watersheds in our water priority areas countries to support local communities. will increase by 41% over and above our In our 2021 water risk assessment, we Optimistic climate scenario baseline costs and additional one-off CapEx focussed on our production facilities to The optimistic scenario we used for costs in the lead-up to 2040 of €78million determine which plants are more likely to be assessment purposes represents a world will be required. affected by climate change, the extent to with stable economic growth and global and national institutions making slow but steady Note: The ‘pessimistic’ scenario has less which they may be affected and the financial progress towards achieving development impact on our business than the ‘optimistic’ impact of ensuring sustainable supply for goals. Globally, carbon emissions start scenario in a number of areas. This is because both our production and the local community. declining by 2040 and temperature increases under the pessimistic scenario used in the In future years, we will gradually broaden the are limited to between 1.1 and 2.6 degrees Aqueduct modelling, there is less urban scope of our assessment to also consider (RCP4.5). growth. As the majority of our plants are water risks associated with our supply chain. located in or near large urban areas, there To conduct the 2021 assessment, we Under this scenario, our operations in isless stress on the local watersheds. estimated annual production volumes up Armenia, Bulgaria, Greece, Cyprus, Russia, to2030 and 2040 for each plant, based on Italy and Nigeria would be located in Mitigating water risk long-range planning estimates. We then water-risk areas. Efforts to address the risks identified in this determined the water utilisation rates for By 2030, average baseline water stress is analysis could include watershed protection each plant for normal and peak production expected to increase by 30%. To meet our and restoration, rainwater harvesting, and as well as the capacity of our water sources production needs as well as replenish the infrastructure improvements to provide without considering the impact of climate local watersheds in our water priority areas, communities with greater access to water change. This allowed us to create a we estimate our annual water costs will for drinking and sanitation. We will continue baselinemodel. | | increase by 40% over and above our baseline | to implement water usage reduction | | --- | --- | --- | | We then used data available from the World | costs, and additional one-off CapEx costs | plansand obtain certification for our | | Resources Institute’s (WRI) Aqueduct Water | inthe lead‑up to 2030 of €42million will | plantsunder the Alliance for Water | | Risk Atlas to identify the impact of climate | berequired. | Stewardshipprogramme. | change on the watersheds supporting By 2040 under this scenario, average eachplant using both an optimistic and a baseline water stress is expected to increase pessimistic scenario for climate change by 47%. To address these risks, we estimate impact. In this assessment, the impact of our annual water costs will increase by climate change is the difference between 42%over and above our baseline cost water utilisation rates in our baseline and andadditional one‑off CapEx costs in the theWRI scenarios. lead-up to 2040 of €79million will be required. 1. The ‘true cost of water’ is a Coca-Cola system multiplier that is used to calculate both the internal costs of water but also a number of external factors For more information on our efforts to such as potential for increased taxes and levies. addresswater challenges, see page 50. 72 COCA-COLA HBC Business model and prospects In addition, economic sanctions imposed Our business model and strategy, outlined onRussia have had a significant impact ## Viability | on pages 6-9 of this report, documents the | onforeign exchange rates for the Rouble | | --- | --- | | key factors that underpin the evaluation of | andthe price of a number of commodities | | our prospects. These factors include our: | suchas oil – which affects PET prices, and | ## statement aluminum. Countersanctions imposed by • attractive geographic diversity; Russia may have an impact on our Russian • strong sales and execution capabilities; operations as well as other countries in our • ability to innovate; territory. Although there remains a lot • market leadership; ofuncertainty around how and when this • global brands; and conflict may be resolved, we have considered • diverse beverage portfolio. as best we can, the potential impact inourfinancial projections inanumber As for many companies, the COVID-19 ofthescenarios. pandemic continued to present a challenging | environment for the Group. Despite | The Board considers that there will be | | --- | --- | | significant changes to how consumers | changes to our markets over the longer | | purchase and consume our products and | term but continues to believe that our | | the impact on our customers, our strong | diverse geographic footprint, including | | cash position and ability to innovate has | exposure to emerging markets that have | | shown the Group’s business tobe robust. | lowper capita consumption and therefore | | In2021 we experienced a gradual recovery | greater opportunity for growth, and a | | from the COVID-19 pandemic as restrictions | provenstrategy in combination with our | | onkey channels lifted. Therecontinues to be | leadingmarket position, offer significant | | uncertainty associated with the risk of new | opportunities for future growth. | variants and the ability of governments to Our Board has historically applied and manage the economic recovery. continues to apply a prudent approach to | In the latter stages of 2021, tensions | the Group’s decisions relating to major | | --- | --- | | increased between the governments of | projects and investments. From 2017 to | | Russia and Ukraine, which led to military | 2021, we generated free cash flow of €467 | | conflict in early 2022. Economic sanctions | million per year on average. | were imposed on Russia by the US, UK and | EU as well as many other countries, and | Key assumptions of the business | | --- | --- | | counter sanctions by the Russian | plan and related viability period | | government in retaliation. On the 8th March | The Group maintains a well-established | | 2022, The Coca-Cola Company (TCCC) | strategic business planning process | | announced that it is suspending its business | whichhas formed the basis of the Board’s | | in Russia. At the time of publication the | quantitative assessment of the Group’s | | Group is working closely with TCCC to | viability, with the plan reflecting our current | | implement this decision. | strategy over a rolling five-year period. | The financial projections in the plan are based on assumptions for the following: • key macroeconomic data that could impact our consumers’ disposable incomeand consequently our sales volume and revenues; • various scenarios relating to the ability ofgovernments in some key markets tomanage economic recovery from the impact of COVID‑19 pandemic; • key raw material costs, including theimpact of climate change on the availability and cost of water under two different climate scenarios (see also page71 for more information on our quantitative assessment of the impact ofclimate change on water availability and cost. In addition to 2030 and 2040, we also included interim calculations to 2026 for the purpose of our viability assessment); and the impact of the Russia/Ukraine conflict on commodity costs; 73INTEGRATED ANNUAL REPORT 2021 | • loss of sales volume and revenues as | | As part of our assessment, we considered | Scenario 6: The impact of higher | | --- | --- | --- | --- | | | aresult of TCCC’s suspension of its | the continuing impact of the COVID-19 | operational costs of water, as a result of | | | operations for a period of time in Russia; | pandemic to the business and found this | theeffects of climate change under two | | • foreign currency rates; including the | | tobe limited, considering the strong | different climate scenarios, as well as the | | | impact of extended economic sanctions | performance throughout the development | capital expenditure required to meet our | | | against Russia and the impact on foreign | of the pandemic across our territories and | water needs as well as the needs of local | | | exchange rates as a result of the Russia/ | the re-opening of global economies | communities in water stressed areas. | | | Ukraine conflict; | alongwith the progress of vaccination | Principal risk: Water availability and usage. | programmes. However, we also considered • spending for production overhead and The above scenarios were tested both in the potential effect of further economic operating expenses; isolation and in combination. The stress disruption due to market specifics and the • working capital levels; and testing showed that due to the stable cash impact from emergence of COVID-19 • capital expenditure. generation of our business, the Group would variants, along with the Group’s proposed be able to withstand the impact of these The Board has assessed that a viability responses. We also considered to the extent scenarios occurring over the period of the period of five years remains the most possible, the potential impact of TCCC’s financial forecasts. This could be conducted appropriate. This is due to its alignment decision to suspend its operations in Russia by making adjustments, if required, to our withthe Group’s strategic business planning for a period of time, as well as sanctions and operating plans within the normal course cycle, consistency with the evaluated counter sanctions as a result of the Russia/ ofbusiness, including but not limited to potential impacts of our principal risks as Ukraine conflict. adjustments to our operations and temporary disclosed on pages 62-65 and our We have continued to stress test the plan reductions in discretionary spending. impairment review process, where goodwill against several severe but plausible and indefinite-lived intangible assets are Following a thorough and robust downside scenarios linked to certain tested based on our five-year forecasts. assessment of the Group’s risks that principal risks as follows: couldthreaten our business model, future Scenario 1: The impact of changes to performance, solvency or liquidity, the Assessment of viability foreign exchange rates was considered, Boardhas concluded that the Group is Qualitatively, we analysed the output of our particularly the depreciation of foreign wellpositioned to effectively manage its robust enterprise risk management and currencies including the Russian Rouble, financial, operational and strategic risks. internal business planning and liquidity alsoconsidering effects from the Russia/ management processes, to ensure that the Ukraineconflict, and Nigerian Naira. Principal Viability Statement risks to the Group’s viability are understood risks:foreign exchange fluctuations, Based on our assessment of the Group’s and are being effectively managed. commoditycosts and geopolitical and prospects, business model and viability as The acquisition and integration of Coca- securityenvironment. outlined above, the Directors can confirm Cola Bottling Company of Egypt (‘CCBCE’) that they have a reasonable expectation that Scenario 2: Lower estimates for sales will occur during the period covered by the the Group will be able to continue operating volumes for various reasons including the viability statement. Considering the due and meet its liabilities as they fall due over the ability of a range of stakeholders, including diligence and operational review process five-year period ending 31 December 2026. governments, in several of our key markets performed as well as the acquisition business to manage economic recovery from case, no risks to the Group’s viability over COVID-19 pandemic, and the potential the five-year period of this assessment have impact of the Russia/Ukraine conflict. been identified as a result of the acquisition. Principal risk: Geopolitical and The Board has concluded that the Group’s securityenvironment. well-established processes across Scenario 3: Lower estimates for sales multiplestreams continues to provide a revenue for various reasons including the comprehensive framework that effectively longer term, changes brought on by supports the operational and strategic COVID-19 pandemic on consumer demand objectives of the Group. It also provides a and preferred channels. Principal risk: robust basis for assessment and confirmation Changing retail environment. of the Group’s ability to continue operations and meet its obligations as they fall due over Scenario 4: Continued stakeholder focus the period of assessment. onissues relating to sugar and packaging resulting in the potential for discriminatory Supporting the qualitative assessment was taxation. Principal risks: Plastics and aquantitative analysis performed as part of packaging waste and Product-related taxes strategic business planning. This assessment and regulatory changes. included, but was not limited to, the Group’s ability to generate cash. Scenario 5: The impact of higher raw material costs, was also considered. Principal risks: Foreign exchange fluctuations and Commodity costs. 74 COCA-COLA HBC Financial review # Strong execution drives growth momentum "The business delivered a very strong recovery in 2021, with all key metrics above pre-pandemic levels." ## Strong recovery and momentum The business delivered a very strong recovery in 2021, with all key metrics above pre-pandemic levels. This is the result of consistent focus on our strategic priorities and disciplined execution in a volatile environment. Performance highlights included: - FX-neutral revenue growth of 20.6% like-for-like¹. Reported revenues +16.9% - Volume growth of 14.0% like-for-like, or 13.0% on a reported basis, propelled by the Emerging and Established segments - Revenue growth management initiatives, led by pricing drove FX-neutral revenue per case up to 5.8% - Comparable EBIT grew by 23.6% with margins +60bps to 11.6%. Reported EBIT grew by 21.0% - Operating costs as a percent of revenue improved by 2.2pp, driven by operating leverage, cost saves higher than plan; 30 bps benefit from the Cyprus property sale - This improvement in EBIT and EBIT margins was achieved while increasing marketing expenditure by 63%, almost back to pre-pandemic levels - Consistent investment behind our strategic priorities is building growth momentum. We expanded the rollout of Costa Coffee and launched Caffé Vergnano in Q4. We announced our geographical expansion into Egypt with the acquisition of Coca-Cola Bottling Company of Egypt, which closed in January 2022. And we announced our commitment to net zero emissions by 2040 - Strong earnings growth, record high free cash flow and increased dividend pay-out target range to 40-50% - The balance sheet remains robust and flexible. 1. Performance, unless stated otherwise, is negatively impacted by the change in classification of our Russian superbusiness. Multon, from a joint operation to a joint venture, following its re-organisation in May 2020. Performance is also positively impacted by the acquisition of Banto in June 2019, when compared to 2019. Unless stated otherwise, performance compared to 2019 is presented on a like-for-like basis. 2. For details on APMs refer to: Alternative Performance Measures and Definitions and reconciliations of APMs' sections. 3. Refer to the condensed consolidated income statement. 4. Net Profit and comparable net profit refer to net profit and comparable net profit respectively after tax attributable to owners of the parent. 75INTEGRATED ANNUAL REPORT 2021 Income statement Key financial information % Category growth and ongoing market share 2021 2020 change gains drove full year volume up 14.0% on a Volume (million unit cases) 2,412.7 2,135.6 13.0 like-for-like basis, while reported volume was Net sales revenue (€ million) 7,168.4 6,131.8 16.9 up 13.0%, still impacted by the reorganisation Net sales revenue per unit case (€) 2.97 2.87 3.5 | in the structure of our Russian Juice | | 2 | | | --- | --- | --- | --- | | | Currency-neutral net sales revenue | (€ million) 7,168.4 5.994.9 19.6 | | | business (Multon). | | | 2 | | | Currency-neutral net sales revenue per unit case | | (€) 2.97 2.81 5.8 | 3 FX-neutral revenue per case expanded Operating profit (EBIT) (€ million) 799.3 660.7 21.0 2 | by5.8%, or 3.9% excluding pricing taken | Comparable EBIT | (€ million) 831.0 672.3 23.6 | | | | --- | --- | --- | --- | --- | | topass on the Polish sugar tax. The strength | EBIT margin (%) 11.2 10.8 40bps | | | | | ofour brand portfolio was evident, with price | | | | 2 | | | Comparable EBIT margin | | | (%) 11.6 11.0 60bps | | taken in 95% of our markets, while market | Net profit (€ million) 547.2 414.9 31.9 | | | | | share expanded. | | | 2,4 | | | | Comparable net profit | | | (€ million) 578.1 431.4 34.0 | 2,4 Comparable basic earnings per share (€) 1.584 1.185 33.7 Category mix improved as we drove the Sparkling and Energy categories. Package Percentage changes are calculated on precise numbers. mix was also accretive thanks to single-serve | incidence in the at-home channel, and | Balance sheet | | | | | --- | --- | --- | --- | --- | | | | | 2021 | 2020 | | thereopening of out‑of‑home. The rapid | | € million | | € million | | Emerging segment volume growth resulted | Assets | | | | | in negative country mix at consolidated | Total non-current assets 5,357.4 5,046.0 | | | | Group level. Total current assets 3,156.9 2,527.1 2021 FX-neutral revenue increased by 20.6% Total assets 8,514.3 7,573.1 on a like-for-like basis. Liabilities Total current liabilities 2,516.4 2,026.2 Prioritisation of the growth opportunities Total non-current liabilities 2,880.8 2,913.6 across our 24/7 portfolio continues to drive Total liabilities 5,397.2 4,939.8 performance and has created a stronger Equity andmore resilient mix of categories. Owners of the parent 3,114.5 2,630.7 Weaccelerated market share gains in Non-controlling interests 2.6 2.6 non-alcoholic ready-to-drink beverages Total equity 3,117.1 2,633.3 (NARTD) adding 90bps in value share in Total equity and liabilities 8,514.3 7,573.1 2021, while also improving or maintaining our Sparkling share position in the Figures are rounded. majorityof markets. Reported revenues increased by 16.9%, FX- neutral raw material cost per case Comparable taxes amounted to €188.2 which also reflects the negative impact increased by 8.0%, while comparable COGS million, representing a comparable tax rate ofthe change in accounting treatment per case increased by 6.3% in the year. of 24.5%, 420bps lower than the rate in ofour Russian juice business (Multon) and Comparable operating costs increased by theprior year as we lapped one‑off tax theweakening of the Russian Rouble versus only 7.5% or €125.4 million as we retained charges in 2020. the Euro. careful cost discipline throughout the year. Net financing costs decreased to €67.6 Comparable gross profit grew by 11.7% We invested behind growth opportunities million, €2.5 million lower compared with while gross profit margins declined by 170 incresing marketing spend by 63% in the theprior year.This led to a 34% increase basis points to 36.2%. We saw headwinds year. Balancing investment in revenue ofcomparable net profit to €578.1 million. | from input cost inflation across all our | generating activities with cost savings | | --- | --- | | keycommodities of sugar, aluminium | elsewhere, resulted in a 2.2 percentage | | andPETresin in the second half of the | pointimprovement in comparable operating | | yearinparticular. | costs as a percent of revenue, which | reached 25.1%. Comparable EBIT increased by 23.6% to€831.0 million,taking comparable EBIT margins up 60 basis points year on year, to 11.6%. This includes a 30-basis point benefit from the sale of a property in Cyprus in December. This divestment is part of our normal course of business of efficiently managing our fixed asset base. Nevertheless, we do not expect a disposal of this magnitude to repeat. 76 COCA-COLA HBC ### Financial review continued Balance sheet Borrowings FX-neutral revenue growth The balance sheet strengthened further in Our medium- to long-term aim is to maintain year on year | | 2021, increasing the headroom to support | a ratio of net debt to comparable adjusted | | --- | --- | --- | | | investment in the business as well as the | EBITDA in the range of 1.5 – 2.0 times. | | 19.6% | potential for future inorganic expansion. | In2021, we ended the year with a ratio of | 1.1times. In January we completed the Total non-current assets increased by acquisition of Coca‑Cola Bottling Company €311.4 million, mainly driven by additions Comparable EBIT of Egypt, taking our leverage to 1.6 times. ofproperty, plant and equipment, currency translation and the acquisition of a minority Our primary funding strategy in the debt ## €831m equity shareholding in Caffè Vergnano. capital markets involves raising financing through our wholly owned Dutch financing Net current assets rose by €139.6 million in subsidiary, Coca‑Cola HBC Finance B.V. 2021 mainly as a result of higher investments Comparable EBIT margin in financial assets. Trade receivables and We use our €5 billion Euro Medium Term growth year on year | | inventory also increased, only partially offset | Note (EMTN) and our €1 billion Euro | | --- | --- | --- | | | by lower cash and cash equivalents and higher | Commercial Paper (ECP) programmes | | +60bps | trade payables. Total non-current liabilities | asthe main basis for financing. | decreased by €32.8 million in 2021, largely We finished 2021 with an outstanding due to the reclassification of the current balance of €235 million on our Commercial portion of loans payable to joint ventures Paper Programme. We did not issue any new from non-current to current liabilities. notes under our Euro Medium Term Note programme. Our next bond maturity is not Cash flow due until November 2024. Due to an improvement in operating profit At the end of 2021, the Group had €2.6 and working capital, net cash from operating billion and €0.8 billion available under the activities increased by 18.8% during the year. EMTN and ECP programmes respectively Capital expenditure, net of receipts from and also €0.8 billion of an undrawn thedisposal of assets and including principal revolvingcredit facility (RCF). None of the repayments of lease obligations, increased aforementioned credit facilities carry any by 16.4% year-on-year. Investment focused financial covenants which would restrict the on four key areas: Building additional Group’s access to capital. production capacity in priority markets and categories; expanding the coverage of our Dividend coolers in the market, which are a key driver In view of the Group’s progressive dividend of improved single‑serve mix; accelerating policy, the strength of its balance sheet investments in our digital agenda; and andhealthy liquidity position, the Board of continued support of our sustainability Directors has proposed a dividend of €0.71 commitments. per share. This is a 10.9% increase from | Capital expenditure represented 7.5% of | the€0.64 per share for 2020. The dividend | | --- | --- | | netsales revenue, at the upper end of our | payment will be subject to shareholders’ | | 6.5%-7.5% target. | approval at our Annual General Meeting. | Furthermore, we have increased the We generated €601.3 million of free cash flow targetpayout ratio to 40 to 50% from in 2021, up 21.0% from the €497.0 million 35to45%previously. generated in 2020. This result reflects higher operating profitability, working capital improvements partially offset by higher capital expenditures. Cash flow 2021 2020 € million € million Cash flow from operating activities 1,142 962 1 Payments for purchases of property, plant and equipment (514) (419) Proceeds from sales of property, plant and equipment 36 13 Principal repayments of lease obligations (63) (59) Free cash flow 601 497 1. Payments for purchases of property, plant and equipment for 2021 include €7.1 million (2020: €nil) relating to repayment of borrowings undertaken to finance the purchase of production equipment by the Group’s subsidiary inNigeria, classified as ‘Repayments of borrowings’ in the condensed consolidated cash flow statement. Figures are rounded. 77INTEGRATED ANNUAL REPORT 2021 Economic value Following a devaluation early in 2021, Total tax by category in 2021 (%) | HIgher profits combined with lower average | theNigerian Naira continued to weaken | | --- | --- | | net borrowings in 2021 resulted in a significant | gradually. The market is still affected by | | increase in return on invested capital (ROIC) | lingering shortages of foreign currency in the | | from 11.1% in 2020 to 14.8% in 2021. | local foreign exchange market. The Group | | Adjusted for the property sale in Cyprus, | continues to make use of risk management | | ROIC was 14.4%. | instruments offered in Nigeria, which | compensate a part of the financial impact At the same time, our weighted average ofthe weakening Naira, albeit not assisting cost of capital (WACC) increased from 7.8% with the limited liquidity in hard currency. in 2020 to 7.9% in 2021. We continued to grow the positive economic value generated Our general policy is to retain a minimum by our operations. amount of liquidity reserves in the form ofcash and cash equivalents on our balance Corporate income tax 49.3% sheet. During 2021, we invested our excess Financial risk management Withholding tax 4.2% cash primarily in short-term time deposits Payroll taxes 37.9% The gradual relaxation of COVID-19 – and money-market funds. VAT (cost) 4.0% related mobility restrictions contributed Environmental taxes 0.2% toboost economic growth in many of the | | | | Other taxes | 4.4% | | --- | --- | --- | --- | --- | | geographies where we operate. While this | Looking ahead | | | | | positively affected several currencies relevant | With the release of our full year 2021 | | | | | to the Group, this strong recovery in demand, | resultsannouncement on 22nd February, | Taxes we contribute to our | | | | coupled with supply chain disruptions led to | Coca‑Cola HBC set guidance for the year | communities | | | | the rapid rise of commodity prices including | ina wide range that considered geopolitical | When considering tax, Coca-Cola | | | | oil, aluminium and sugar throught 2021. | risks, aswell as headwinds from commodities | HBCgives due consideration to the | | | | | andcurrencies. However, in the days that | importance of earning community trust. | | | Effective financial risk management proved followed this, the conflict in Ukraine developed More specifically, we commit to continue successful in mitigating a material part of further andfaster than anticipated. paying taxes in the countries where value input cost increases for 2021. At the same is created and ensure that we are fully time by adding new risk managed commodity As of the publication of our integrated compliant with the spirit as well as the prices and countries, we enlarged our annual report, we believe that it is still too letter of tax laws and regulations across application of financial risk management early to quantify the impact that the evolving all jurisdictions we operate in. In addition, andsecured good entry points for future geopolitical crisis and many governments’ we commit to being open and transparent commodity exposures as well. developing reactions to it will have on our with tax authorities about the Group’s tax business or on our full year 2022 results. In terms of foreign exchange risk, the Group affairs and to disclose relevant information Given that we generated c. 20% of 2021 is exposed to exchange rate fluctuation of toenable tax authorities to carry out volumes and EBIT from Russia and Ukraine, the Euro versus the US Dollar and the local theirreviews. combined with the uncertainty of the currency of each country of our operations. duration and economic impact, we no longer We support the communities in the Our risk management strategy involves believe that it is prudent to provide guidance countries where we operate directly, hedging transactional exposures arising from for our group’s current financial year. bycreating economic wealth, and also currency fluctuations, with available financial indirectly, by paying taxes. These taxes instruments on a 12‑month rollingbasis. include corporate income tax calculated Asa matter of Group policy, translational on each country’s taxable profit, exposures are not hedged. employer taxes and social security Ben Almanzar Higher commdity prices,along with the contributions, net VAT cost and other Chief Financial Officer strong Russian macroeconomic position taxes that are reflected as operating and prompt tightening of monetary policy, expenses. Excise taxes and taxes borne supported the strong performance of the by employees are not included. Russian Rouble until the fourth quarter of2021. At that point, rising geopolitical tensions had a negative impact on the 2021 Borrowing structure (€ m) Rouble, which was mitigated by our active ## €2,937m financial risk management strategy to a large extent in the year. | Bonds issued | 2,386m | | --- | --- | | Commercial paper | 235m | | Leases | 160m | | Other | 156m | 74 COCA-COLA HBC Financial review continued # Segment highlights ![img-15.jpeg](img-15.jpeg) ## Established markets Established segment FX-neutral revenues grew by 13.9%, propelled by both volume and price/mix in 2021. The segment's revenues closed only 2.1% below 2019 levels. Italy, Greece and Ireland all grew volumes by double digits thanks to a very good performance from the out-of-home channel enabled by strong execution. There is room for further improvements as we look ahead, considering that volumes in the out-of-home channel still remain below 2019 in every market in the segment. Meanwhile, the at-home channel finished with volumes 5% above 2019. EBIT grew by 44% while margins expanded 250 basis points, of which 90 basis points was due to the property sale in Cyprus. The rest is mainly due to positive operational leverage on revenue growth. Volume vs. 2020 9.9% FX-neutral net sales revenue per case vs. 2020 3.7% ![img-16.jpeg](img-16.jpeg) ## Developing markets The Developing segment's currency-neutral revenue increased by 18.0% with price/mix expanding 17.0%. FX-neutral revenues are now 5.7% above 2019 levels. Performance was impacted by the Polish sugar tax. Without it, the segment's price/mix growth was 5.8%, and volume growth was up 4.4%. It should be noted that Poland's volume decline was in line with our expectations given the magnitude of the price increases to offset discriminatory taxation. We are particularly pleased with performance of single-serve formats, low- and no-sugar variants as well as our market share gains. We expect Poland's volumes to return to growth in 2022. EBIT grew by 4.3% with EBIT margin weighed down by the sugar tax. Volume vs. 2020 0.8% FX-neutral net sales revenue per case vs. 2020 17.0% ![img-17.jpeg](img-17.jpeg) ## Emerging markets We saw sustained, strong momentum in the Emerging segment with like-for-like revenue up 27.1%. FX-neutral revenues are now 24% above 2019 levels propelled by Russia, Nigeria and Ukraine as well as recovery in the rest of the segment. Nigerian volumes grew by nearly 30%. Strong performance in Sparkling and Energy is driving very healthy category mix. Combining this with the pricing taken throughout the year, allowed high-teens price/mix in Nigeria in 2021. In Russia volume growth was 25% like for like. The category is benefiting from the healthy consumer demand. Our teams have harnessed these conditions, with strong activations in the premium part of the market. EBIT grew by 17.3% and Emerging remains our highest margin segment. Volume vs. 2020 18.6% FX-neutral net sales revenue per case vs. 2020 5.3% 79INTEGRATED ANNUAL REPORT 2021 2021 2020 % change Volume (million unit cases) 590 537 9.9 Volume breakdown by country (%) Net sales revenue (€ million) 2,479 2,175 14.0 Operating profit (EBIT) (€ million) 286 203 40.5 Greece 18% Austria 13% Comparable EBIT (€ million) 301 209 43.9 Republic of Ireland 1 Total taxes (€ million) 131 111 17.4 and Northern Ireland 13% 2 Population (million) 94 94 – Switzerland 11% GDP per capita (US$) 44,414 39,552 12.4 Cyprus 2% Bottling plants (number) 15 15 – Employees (number) 6,251 6,407 (2.4) Water footprint (billion litres) 3.751 3.744 0.2 Carbon emissions (tonnes) 65,577 67,450 (2.8) Safety rate (lost time accidents >1day per 100 employees) 0.44 0.55 (20.0) 1. Total taxes include corporate income tax, withholding tax and deferred tax, as well as social security costs and other taxes that are reflected as operating expenses; asperIFRSaccounts. 2. Population source: International Monetary Fund, World Economic Outlook Database, October 2021. 2021 2020 % change Volume (million unit cases) 416 412 0.8 Volume breakdown by country (%) Net sales revenue (€ million) 1,366 1,171 16.6 Operating profit (EBIT) (€ million) 105 97 7.9 Hungary 22% Czech Republic 12% Comparable EBIT (€ million) 107 102 4.3 Baltics 8% 1 Total taxes (€ million) 46 63 (27.6) Croatia 7% 2 Population (million) 76 76 – Slovakia 6% GDP per capita (US$) 19,622 17,494 12.0 Slovenia 2% Bottling plants (number) 9 9 – Employees (number) 4,261 4,581 (7.0) Water footprint (billion litres) 3.214 3.159 1.7 Carbon emissions (tonnes) 45,633 44,927 1.6 Safety rate (lost time accidents >1day per 100 employees) 0.47 0.33 42.4 1. Total taxes include corporate income tax, withholding tax and deferred tax, as well as social security costs and other taxes that are reflected as operating expenses; asperIFRSaccounts. 2. Population source: International Monetary Fund, World Economic Outlook Database, October 2021. 2021 2020 % change Volume (million unit cases) 1,407 1,187 18.6 Volume breakdown by country (%) Net sales revenue (€ million) 3,324 2,786 19.3 Operating profit (EBIT) (€ million) 409 360 13.5 Russian Federation 27% Romania 14% Comparable EBIT (€ million) 424 361 17.3 Serbia and Montenegro 10% 1 Total taxes (€ million) 189 169 12.2 Ukraine 10% 2 | Population | (million) 453 448 1.1 | Bulgaria | 4% | | --- | --- | --- | --- | | GDP per capita (US$) 6,334 5,705 11.0 | | Belarus | 3% | | | | Bosnia and Herzegovina | 2% | Bottling plants (number) 32 32 – Armenia 1% Employees (number) 16,700 16,734 (0.2) Moldova 1% Water footprint (billion litres) 10.721 8.654 23.9 Carbon emissions (tonnes) 314,582 319,544 (1.6) Safety rate (lost time accidents >1day per 100 employees) 0.14 0.11 27.3 Poland Nigeria Italy 28% 43% 43% 1. Total taxes include corporate income tax, withholding tax and deferred tax, as well as social security costs and other taxes that are reflected as operating expenses; asperIFRSaccounts. 2. Population source: International Monetary Fund, World Economic Outlook Database, October 2021. Population includes N. Macedonia. Figures are rounded. Percentage changes are calculated on precise numbers. 80 COCA-COLA HBC ### Non‑financial reporting directive ### This spread constitutes our ## Delivering 24/7 takes non-financial information ### statement. The below provides ### page references mapping ## anintegratedapproach ### outhow our report complies ### with relevant regulation on ### non-financial information. ### This information ### issupplementary. ### Our purpose Policies and values Effective oversight Serving as our north starambition Underpinning our business and setting Our Board and senior management toguide everythingwedo. the direction for how we achieve ensure we stay on course to achieve ourgoals. ourvision. Our purpose pages 16-17 Values pages 16-17 The Executive Leadership Team • Winning with customers pages 104-106 • Nurturing our people • Excellence • Integrity • Learning • Performing as one Policies (see our website) Environmental matters • Environmental policy • Climate Change policy • Packaging waste management policy • Sustainable Agricultural Guiding Principles • Water Stewardship policy • Biodiversity statement Employees • Code of Business Conduct • Diversity and Inclusion policy ### We are devoted to growing How our Board considers • Occupational Health and Safety policy ### every customer and delighting • Quality and Food Safety policy stakeholders in decision making ### every consumer 24/7 by Human rights pages 100-101 • Human Rights policy ### nurturing passionate and Social Responsibility Committee • Supplier Guiding Principles ### empowered teams of people • Slavery and Human Trafficking statement pages 116-117 ### while enriching our communities Social matters • Health and Wellness policy ### and caring for the environment. • HIV/AIDS policy • Code of Business Conduct • Supplier Guiding Principles • GMO position statement • Community Contributions policy • Premium spirits Responsible Marketingpolicy • Public policy engagement • Quality and Food Safety policy Anti‑bribery and Corruption • Code of Business Conduct • Anti-bribery policy and compliance handbook • Supplier Guiding Principles • Community contributions policy Principal risk • Risk policy 81INTEGRATED ANNUAL REPORT 2021 non-financial companies are to disclose For 2021, we have examined the ### EU taxonomy which percentage of their turnover, CapEx, taxonomy-eligible economic activities The Taxonomy Regulation is a key and OpEx meets its criteria. listed in the Delegated Acts and concluded component of the European Commission’s that the primary economic activity of action plan to redirect capital flows towards As a company domiciled in Switzerland, CCHBC – manufacturing of beverages a more sustainable economy. The EU CCHBC is not in scope of the EU Non- andfood products – is not included in Taxonomy, a classification system for Financial Reporting Directive (NFRD), theEU Taxonomy annexes and that no sustainable activities in support of the thuswe are not subject to reporting on othertaxonomy-eligible activities have EU’sGreen Deal, has been introduced theEU Taxonomy. However, we have beenidentified. | thisyear, covering as of now two of the | beenvoluntarily complying with other | | | --- | --- | --- | | sixenvironmental objectives in the | requirements of the NFRD since 2018. | In 2022, we will remain alert to the | | supplementing Delegated Acts: climate | Aninternal cross-functional team has been | evolvingEU legislation around corporate | | change mitigation and climate change | working to evaluate the Group’s activities | sustainability disclosure requirements, | | adaptation. Under the EU Taxonomy, | with regards to the EU taxonomy. | andwe will continue our work to maintain | top-quality ESG reporting. | Positive influence | Executing our vision | Defining our success | | --- | --- | --- | | Being conscious of stakeholders, risks, | To fulfil our Growth Story 2025we will | Operating in a sustainable waytoensure | | market changes and material issues, | execute on each of our five growth pillars, | our remuneration and sustainability | | while responding through our business | considering all stakeholder at every step | commitments are interlinked. | | model inapositive way. | of the journey. | | Business model pages 8-9 Growth pillars pages 16-17 Remuneration report pages 118-140 Leverage our ## 1 unique 24/7 portfolio Win in the ## 2 marketplace Fuel growth through ## 3 competitiveness andinvestment The CEO’s individual performance is Stakeholder engagement measured in key strategic areas and taken pages10‑13 Cultivate the potential into account for MIP. These strategic areas ## 4 of our people include the Company’s performance in Market trends pages 14-15 ESG benchmarks. TheCompany received • Regulatory environment the highest scores in 8 of the 10 most • Sustainability recognized ESG benchmarks, DJSI, CDP, MSCI, ecoact, FTSE4GOOD, MSCI and Earn our licence Principal risks pages 62-65 ## 5 Vigeo Eiris. ThePSP contains metrics to operate linked to a reduction in CO 2 emissions. Material issues page 56 | | The CO | 2 emissions target in the PSP | | --- | --- | --- | | GRI Content Index | implicitly captures reduction in plastics, | | | https://www.coca‑colahellenic.com/ | which was a key driver of its selection | | asametric. content/dam/cch/us/documents/ See pages 123, 134-135 oar/Coca‑Cola‑HBC‑2021‑GRI‑ Content-Index.pdf.downloadasset.pdf CEO pay ratio See page 137 Mission 2025 sustainability commitmentspages 54-55 • Emissions reduction • Water reduction and stewardship • World Without Waste • Ingredient sourcing • Nutrition • Our people and communities 82 COCA-COLA HBC 83INTEGRATED ANNUAL REPORT 2021 ## Corporate ## Governance ### Contents Corporate Governance 84 Chairman’s introduction to corporate governance 88 Board of Directors 92 Corporate Governance Report 118 Directors’ Remuneration Report 141 Statement of Directors’ Responsibilities 142 2021 SASB Index 84 COCA-COLA HBC # Chairman's introduction to corporate governance # Governing adaptation and change ## Letter from the Chairman of the Board ![img-18.jpeg](img-18.jpeg) ### Dear Shareholder Our Corporate Governance Report for 2021 details our robust governance arrangements throughout the Group and the key activities and decisions undertaken by the Board during the year. Against the backdrop of continued disruption in light of the COVID-19 pandemic, the Board has remained focused on our Growth Story 2025 to support the long-term sustainable success of our business while also overseeing the Company's expansion into Egypt and our commitment to achieving net zero emissions across the entire value chain by 2040. ### Managing and mitigating the effects of the COVID-19 pandemic 2021 saw further disruption from the ongoing COVID-19 pandemic and, again, agility and adaptation were required across the Group to face a wealth of challenges. The Board's key priority in this regard remained the safety of our people, customers, partners and communities. A number of measures continue to be in place to support the physical and mental wellbeing and health of our people as they work to maintain product supply and continue to serve our customers. We are developing programmes to ensure safe and productive workplaces for our people as we transition into a post-COVID working environment. We have also positioned the Company well to take advantage of new, emerging opportunities in the post-pandemic recovery period. In particular, we continue to invest in digital commerce channels where we are seeing revenue growth, boosted by shifting consumer habits amplified by the COVID-19 pandemic, and the Board intends to continue to invest capital and management attention in this area. ### Coca-Cola Bottling Company of Egypt In August 2021, we announced the acquisition of the Coca-Cola Bottling Company of Egypt S.A.E., a leading producer of non-alcoholic ready-to-drink beverages in Egypt. The Board is excited by the considerable opportunities arising from access to the second largest non-alcoholic ready-to-drink market in Africa by volume and the expansion of our emerging markets footprint. The Board was actively engaged in the acquisition process which is discussed in the Applied Governance section of this report on page 96. ### Net zero emissions Building on our long history of ambitious sustainability targets, in 2021 the Board endorsed NetZeroby40, the Company's commitment of reaching net zero greenhouse gas emissions across our entire value chain by 2040. Via an existing, approved science-based target, by 2030 the Company aims to reduce its value chain emissions in Scopes 1, 2 and 3 by 25%. With our NetZeroby40 target, we have set our sights on a further 50% reduction in the following decade. To address the 90% of emissions in Scope 3 resulting from third party actions, we will broaden our existing partnership approach with suppliers. The detailed actions and initiatives required to achieve this ambition are reviewed by the Board's Social Responsibility Committee. ### Celebrating our 70th year 70 years after our business was founded in Nigeria, in 1951, the Board is focused on ensuring the Company's enduring success for the next 70 years. The Board's priorities reflect our understanding of what is needed to ensure resilience while pursuing growth and expansion. Our ownership structure, featuring stable long-term shareholders, and our long-lasting core values help us make decisions and investments with long-term success in mind which represent the same well-rooted values. INTEGRATED ANNUAL REPORT 2021 85 ### Importance of good governance As a Board, we aimed to ensure the highest standards of corporate governance at the same time that we committed to doing the right thing in 2021, putting safety first as COVID-19 restrictions continued to impact our people, customers and communities. Our aim is to always ensure the highest standards of corporate governance, accountability and risk management. Our internal policies and procedures, which have been consistently effective since the Group was formed, are properly documented and communicated against the framework applicable to companies with a premium listing in the UK. The Board and its committees conducted an annual review of the effectiveness of our risk management system and internal controls, further details of which are set out in the Audit and Risk Committee report on page 112. The Board confirms that it has concluded that our risk management and internal control systems are effective. We are subject to the UK Corporate Governance Code 2018. It sets out the principles of good practice in relation to: Board leadership and company purpose; division of responsibilities; composition, success and evaluation; audit, risk and internal controls; and remuneration. Further information on how we have applied the principles and complied with the provisions of the UK Corporate Governance Code 2018 for the year ended 31 December 2021 can be found in this report on page 86. Board meetings normally take place in Zug, Switzerland, but also in selected markets across our territories. As was the case in 2020, certain of these meetings continued to be held online in 2021 due to travel restrictions and safety concerns but the Board also met live in the second half of the year when COVID-19 related travel restrictions were lifted. The Board and its committees were therefore able to meet as often as planned. ### Culture and values The long-term success of our business remains connected to the success of our customers and partners, and our ability to delight consumers with the beverages and brands that they love. We were able to accomplish this due to our well-embedded, values-based culture. The Board plays a critical role in shaping the culture of the Company by promoting growth-focused and values-based conduct and ensuring increased focus on continued learning and the smart risk taking necessary for the Company's adaptation. We monitor our progress in integrating our values through various indicators, including our employee engagement index, diversity indicators, and health and safety indicators, and our Directors lead by example as ambassadors of our values, cascading good behaviour throughout the organisation. As pandemic-related disruptions continued across our territory, we maintained a stepped-up level of engagement with our people to ensure we understood their needs and challenges. Two all-employee pulse surveys and one Culture and Engagement survey were conducted in 2021. While Charlotte Boyle is our designated non-Executive Director responsible for engaging with our people to provide feedback to the Board, feedback from our people through these surveys was brought to the full Board's attention in 2021 to facilitate understanding the concerns raised and ensure rapid response. ### Board evaluation In line with our commitment to adhere to best corporate governance practices, an externally facilitated Board effectiveness evaluation was conducted in the second half of 2021. We will do this once again in 2022 to build upon the learnings of the 2021 evaluation. Key outcomes from the Board effectiveness evaluation conducted in 2021 included on page 102. Further details are disclosed in the Nomination Committee report on page 114. ### Board composition and diversity The composition and size of the Board continues to be kept under review. We believe that our Board is well-balanced and diverse, with the right mix of international skills, experience, background, independence and knowledge in order to discharge its duties and responsibilities effectively. We continue to attach great importance to all aspects of diversity in our nomination processes at Board and senior management levels, while appointing candidates with the credentials that are necessary for the continuing growth of our operations within our highly specialised industry. We believe that having a diverse Board fosters both innovation and resilience and are proud of our track record of female representation. As of the date of this report, female Directors comprise more than 30% of our Board. Bruno Pietracci and Henrique Braun were elected to the Board at the 2021 Annual General Meeting as new non-Executive Directors and José Octavio Reyes and Alfredo Rivera both retired from the Board with effect from the close of that meeting. The skills and expertise each member brings to our Board can be found on pages 88 to 90. Chairman of the Board ![img-19.jpeg](img-19.jpeg) 04 COCA-COLA MBC # The UK Corporate Governance Code 2018 As a Swiss corporation listed on the London Stock Exchange (LSE) with a secondary listing on the Athens Exchange, we aim to ensure that our corporate governance systems remain in line with international best practices. Our corporate governance standards and procedures are continuously reviewed in light of current developments and rulemaking processes in the UK, Switzerland and also the EU. Further details are available on our website. In respect of the year ended 31 December 2021, the Company was subject to the UK Corporate Governance Code 2018 (a copy is available at www.frc.org.uk). Our Board confirms that the Company applied the principles and complied with the provisions of the UK Corporate Governance Code throughout the financial year ended December 2021, except for the following provisions: (1) The Chairman was not independent on appointment (provision 9) and has been a Board member for more than nine years (provision 19), and a full explanation for this departure is provided on pages 87 and 93. On appointment the Board unanimously supported Anastassis David's appointment as Chairman. The Board regularly reviews Anastassis David's position and considers that he continues to effectively lead the Board, that his deep knowledge of the Coca-Cola System position is invaluable and as such it remains appropriate for him to continue in his role as Chairman. (2) Provision 38 requires alignment of Executive Director pension contributions with the wider workforce. Our difficulties in compliance with this provision due to existing contractual obligations were outlined in the Annual Report published in 2021 and are explained on page 123 of the Directors' Remuneration Report. On the appointment of any new Executive Director, we intend that their pension contributions will be aligned with the pension scheme for the wider workforce. Pursuant to our obligations under the Listing Rules, we apply the principles and comply with the provisions of the UK Corporate Governance Code or explain any instances of non-compliance in our Annual Report. The Company has applied the principles as far as possible and in accordance with and as permitted by Swiss law. Further information on appointment of Directors and compliance with the UK Corporate Governance Code can be found as follows: | Section 1: Board leadership and company purpose | See page | | --- | --- | | A. Effective and entrepreneurial board to promote the long-term sustainable success of the company, generating value for shareholders and contributing to wider society | | | B. Purpose, values and strategy with alignment to culture | | | C. Resources for the company to meet its objectives and measure performance. Controls framework for management and assessment of risks | | | D. Effective engagement with shareholders and stakeholders | | | E. Consistency of workforce policies and practices to support long-term sustainable success | | | Chairman's letter | 2-3 | | Strategic report | 2-79 | | Board engagement with key stakeholders | 91-100 | | Shareholder engagement | 100 | | Audit and Risk Committee report | 108-113 | | Conflicts of interest | 103 | | Section 2: Division of responsibilities | See page | | F. Leadership of board by chair | | | G. Board composition and responsibilities | | | H. Role of non-Executive Directors | | | I. Company secretary, policies, processes, information, time and resources | | | Board composition | 92-94 | | Key roles and responsibilities | 94-95 | | General qualifications required of all Directors | 91 | | Information and training | 102 | | Board appointments and succession planning | 102 | | Section 3: Composition, succession and evaluation | See page | | --- | --- | | J. Board appointments and succession plans for board and senior management and promotion of diversity | | | K. Skills, experience and knowledge of board and length of service of board as a whole | | | L. Annual evaluation of board and directors and demonstration of whether each director continues to contribute effectively | | | Board composition | 92-94 | | Diversity, tenure and experience | 91 | | Board, committee and Director performance evaluation | 102 | | Nomination Committee report | 114-115 | | Section 4: Audit, risk and internal controls | See page | | M. Independence and effectiveness of internal and external audit functions and integrity of financial and narrative statements | | | N. Fair, balanced and understandable assessment of the company's position and prospects | | | O. Risk management and internal control framework and principal risks company is willing to take to achieve its long-term objectives | | | Audit and Risk Committee report | 108-113 | | Strategic Report | 2-79 | | Fair, balanced and understandable Annual Report | 110, 113, 141 | | Going concern basis of accounting | 111, 141 | | Validity statement | 72 | | Section 5: Remuneration | See page | | P. Remuneration policies and practices to support strategy and promote long-term sustainable success with executive remuneration aligned to company purpose and values | | | Q. Procedure for executive, director and senior management remuneration | | | R. Authorisation of remuneration outcomes | | | Remuneration Committee report | 118-140 | INTEGRATED ANNUAL REPORT 2021 87 ## Certain differences between the Company's corporate governance practices and the UK Corporate Governance Code The Swiss Ordinance against Excessive Compensation in Listed Companies further limits the authority of the Remuneration Committee and the Board to determine compensation. The effective limitations include requiring that the Annual General Meeting approve the maximum total compensation of each member of the Board and the Executive Leadership Team, requiring that certain compensation elements be authorised in the Articles of Association and prohibiting certain forms of compensation, such as severance payments and financial or monetary incentives for the acquisition or disposal of firms. We are in compliance with the requirements of the Swiss Ordinance against Excessive Compensation in Listed Companies and have amended our Articles of Association to that effect. Anastassis G. David was originally appointed as non-Executive Director in 2006 at the request of Kar-Tess Holding and was not, at the time of his appointment as Chairman, in 2016, independent as defined by the UK Corporate Governance Code. In view of Anastassis David's strong identification with the Company and its shareholder interests, combined with his deep knowledge and experience of the Coca-Cola System, the Board deemed it to be in the best interests of the Group and its shareholders for him to be appointed as Chairman, to continue to promote an effective and appropriately balanced leadership of the Group. In accordance with the established policy of appointing all Directors for one year at a time, the Board intends to continue to keep all positions under regular review and subject to annual election by shareholders at the Annual General Meeting. The Board is cognisant of the length of tenure of the Chairman and when he was first appointed to the Board. However, the Board continues to believe that the proven leadership of our Chairman in combination with his deep knowledge of the Coca-Cola System position him as unique to steer the Group at the current time. ## Application of governance codes ### Other corporate governance codes There is no mandatory corporate governance code under Swiss law applicable to the Company. The main source of law for Swiss governance rules is the company law contained in article 620 ff. of the Swiss Code of Obligations, as well as the Ordinance against Excessive Compensation in Listed Companies. In addition, the UK's City Code on Takeovers and Mergers (the 'City Code') does not apply to the Company by operation of law, as the Company is not incorporated under English law. The Articles of Association include specific provisions designed to prevent any person acquiring shares carrying 30% or more of the voting rights (taken together with any interest in shares held or acquired by the acquirer or persons acting in concert with the acquirer) except if (subject to certain exceptions) such acquisition would not have been prohibited by the City Code or if such acquisition is made through an offer conducted in accordance with the City Code. For further details, please refer to the Company's Articles of Association, which are available on our website. ### Amending the Articles of Association The Articles of Association may only be amended by a resolution of the shareholders passed by a majority of at least two-thirds of the voting rights represented and an absolute majority of the nominal value of the shares represented. ### Share capital structure The Company has ordinary shares in issue with a nominal value of CHF 6.7 each. Rights attaching to each share are identical and each share carries one vote. The Company's Articles of Association also allow, subject to shareholder approval, for the conversion of registered shares into bearer shares and bearer shares into registered shares. Details of the movement in ordinary share capital during the year can be found on page 204. There are no persons holding shares that carry special rights with regard to the control of the Company. ### Powers of Directors to issue and buy back shares Subject to the provisions of the relevant laws and the Articles of Association, the Board acting collectively has the ultimate responsibility for running the Company and the supervision and control of its executive management. The Directors may take decisions on all matters which are not expressly reserved to the shareholders or by the Articles of Association. Pursuant to the provisions of the Articles of Association, the Directors require shareholder authority to issue and repurchase shares. At the Annual General Meeting on 22 June 2021, the shareholders authorised the Directors to repurchase ordinary shares of CHF 6.70 each in the capital of the Company up to a maximum aggregate number of 10,000,000 representing less than 10% of the Company's issued share capital as of 12 May 2021. The authority will expire at the conclusion of the 2022 Annual General Meeting on 21 June 2022 or at midnight on 30 June 2022, whichever is earlier. Total shares held in treasury are 5,894,583 of which 2,464,448 shares are held by Coca-Cola HBC AG and 3,430,135 shares are held by its subsidiary, Coca-Cola HBC Services MEPE. 88 COCA-COLA HBC ### Board of Directors 1 2 4 53 engineering from the University Federal of Rio 1. Anastassis G. David 3. Charlotte J. Boyle deJaneiro, a master’s in industrial engineering Non-Executive Chairman Independent non-Executive Director from Michigan State University and an MBA from Appointed: January 2016. He joined the Board Appointed: June 2017. Georgia State University. ofCoca‑Cola HBC as a non‑Executive Director Skills, experience and contribution: After 14 External appointments: Henrique currently in2006 and was appointed Vice Chairman in 2014. years with The Zygos Partnership, an international serves as President of Latin America Operating Skills, experience and contribution: Anastassis executive search and board advisory firm, Unit for The Coca-Cola Company, a role he has brings to his role more than 20 years’ experience includingnine years as a partner, she retired from held since 2020. as an investor and non-executive director in the her position in July 2017. Prior to that, Charlotte Nationality: American and Brazilian beverage industry. Anastassis is also a former worked at Goldman Sachs International and at Chairman of Navios Corporation. He holds a BA Egon Zehnder International, an international 5. Olusola (Sola) David-Borha inHistory from Tufts University. executive search and management assessment Independent non-Executive Director firm. Charlotte obtained an MBA from the London External appointments: Anastassis is active Business School and an MA from Oxford University Appointed: June 2015. inthe international community. He serves as and was a Bahrain British Foundation Scholar. ViceChairman of Aegean Airlines S.A., Vice Skills, experience and contribution: Sola has Chairman of the Cyprus Union of Shipowners and External appointments: Charlotte serves more than 30 years’ experience in financial Chairmanof the Board of Sea Trade Holdings Inc, asChair of UK for UNHCR, an independent non‑ services and held several senior roles within the a shipowning company of dry cargo vessels. He is executive director and chair of the Environment, Stanbic Group, including the position of Chief also a member of the Board of Trustees of College Sustainability and Community Committee of Executive of Stanbic IBTC Bank from May 2011 to Year in Athens. Capco plc, a non-executive director of Thatchers November 2012. She also served as Deputy Chief Cider Company Ltd, a non-executive adviser to Executive Officer of Stanbic IBTC Bank and Head Nationality: British the Group Executive Board of Knight Frank LLP and of Investment Banking Coverage Africa (excluding as a Trustee and chair of the finance committee South Africa). Stanbic IBTC Holdings is listed 2. Zoran Bogdanovic ofAlfanar, the venture philanthropyorganisation. onthe Nigerian Stock Exchange and is a member Chief Executive Officer, Executive Director of Standard Bank Group. Between January 2017 Nationality: British Appointed: June 2018. and March 2021, Sola has been the Chief Executive of the Africa Regions (excluding South Africa) Skills, experience and contribution: Zoran 4. Henrique Braun forStandard Bank Group, Africa’s largest bank waspreviously the Company’s Region Director Non-Executive Director byassets with operations in 20 countries across responsible for operations in 12 countries and has Appointed: June 2021. thecontinent. been a member of the Executive Leadership Team | since 2013. He joined the Company in 1996 and | Skills, experience and contribution: Henrique | Sola holds a first degree in Economics and | | --- | --- | --- | | has held a number of senior leadership positions, | has vast experience in corporate functions as well | obtained an MBA degree from Manchester | | including as General Manager of the Company’s | as regional and business unit operations in The | Business School. Her executive education | | operations in Croatia, Switzerland and Greece. | Coca‑Cola Company. He joined The Coca‑Cola | experience includes the Advanced Management | | Zoran has a track record of delivering results across | Company in 1996 in Atlanta and progressed | Programme of the Harvard Business School | | our territories and demonstrating the values that | through increasing responsibilities in North | andthe Global CEO Programme of CEIBS, | | are the foundation of our Company culture. | America, Europe and Latin America. His career | Wharton and IESE. | responsibilities have included supply chain, new External appointments: None External appointments: Sola serves as business development, marketing, innovation, non-executive director on the boards of Stanbic Nationality: Croatian general management and bottling operations. IBTC Holdings Plc and Stanbic Uganda Holdings From 2016 to 2020, Henrique served as the Limited, listed entities that are members of the President of the Brazil business unit and from 2013 Standard Bank Group. Finally, Sola was appointed to 2016, he was the President for Greater China Chairman ofStanbic IBTC Bank Plc, a non‑listed and Korea. His other roles in The Coca‑Cola subsidiary ofStanbic IBTC Holdings Plc in Company in the past include Vice President of October2021. Innovation and Operations in Brazil and Director Nationality: Nigerian for Still Beverages (non‑carbonated beverages) in Europe. He first joined the Coca‑Cola Company as a trainee in Global Engineering in the US. Henrique holds a bachelor’s degree in agricultural INTEGRATED ANNUAL REPORT 2021 69 6 ![img-20.jpeg](img-20.jpeg) 7 ![img-21.jpeg](img-21.jpeg) 8 ![img-22.jpeg](img-22.jpeg) 9 ![img-23.jpeg](img-23.jpeg) 10 ![img-24.jpeg](img-24.jpeg) ### 6. Anna Diamantopoulou Independent non-Executive Director Appointed: June 2020 Skills, experience and contribution: Anna, as a former European Commissioner, brings to the Group a unique expertise on matters of employment and equal opportunity together with deep knowledge of the European CSR agenda. Anna was an elected Member of the Greek Parliament for over a decade, during which time she served as Deputy Minister for Industries, Minister of Education, Lifelong Learning and Religious Affairs and Minister of Development, Competitiveness and Shipping of the Hellenic Republic. From 1999 to 2004, Anna served as a member of the European Commission in charge of Employment, Social Affairs and Equal Opportunities. External appointments: Founder and President of DIILTIQ-Network for Reform in Greece and Europe, a leading Athens-based independent, non-partisan policy institute. A Council Member of the European Council on Foreign Relations, an Advisory Board Member of Delphi Economic Forum and a member of the Honorary Board of the Bussala Institute, a foundation aiming to strengthen cooperation between the EU and the GCC. Finally, Anna is the Chair of the European Commission's High Level Group on the future of social protection and the welfare state in the EU. Nationality: Greek ### 7. William W. (Bill) Douglas III Independent non-Executive Director Appointed: June 2016 Skills, experience and contribution: Bill is a former Vice President of Coca-Cola Enterprises, a position in which he served from July 2004 until his retirement in June 2016. From 2000 until 2004, Bill served as Chief Financial Officer of Coca-Cola HBC. Bill has held various positions within the Coca-Cola System since 1985, including positions with responsibility for the IT function. Before joining the Coca-Cola System, Bill was associated with Ernst & Whitney, an international accounting firm. He received his undergraduate degree from the J.M. Tull School of Accounting at the University of Georgia. External appointments: Bill is the Lead Director and Chairman of the Audit Committee of SiteOne Landscape Supply, Inc. He is also a member of the Board of Directors and Chair of the Audit Committee for The North Highland company. He also serves on the Board and is a past Chair of the University of Georgia Trustees. Nationality: American ### 8. Reto Franciosi Senior Independent non-Executive Director Appointed: June 2016 Skills, experience and contribution: Reto has been Professor of Applied Capital Markets Theory at the University of Basel since 2005 and is the author of several highly respected books on capital market issues. From 2005 until 2015, Reto was Chief Executive Officer of Deutsche Börse AG and from 2002 until 2005, he served as Chairman of the Supervisory Board and President of the SWX Group, which owns the Swiss Stock Exchange and has holdings in other exchanges. Between 2000 and 2002, Reto was Co-Chief Executive Officer and Spokesman for the Board of Directors of Consons AG. Between 1993 and 2000, he held various management positions at Deutsche Börse AG, including that of Deputy Chief Executive Officer. He earned his Doctorate of Law at the University of Zurich. External appointments: Reto serves as Chairman of the Supervisory Board of UBS Europe SE and also as the Chairman of the Supervisory Board of Swiss International Airlines. Reto is also a Vice Chairman at the Board of Directors of Medtech Innovation Partners AG, Basel. Nationality: Swiss ### 9. Anastasios I. Leventis Non-Executive Director Appointed: June 2014 Skills, experience and contribution: Anastasios began his career as a banking analyst at Credit Suisse and then American Express Bank. He has previously served on the boards of the Cyprus Development Bank and Papoutsanis SA. He holds a BA in Classics from the University of Exeter and an MBA from New York University's Leonard Stern School of Business. External appointments: Anastasios is a board member of A.G. Leventis (Nigeria) Ltd. He is also a director of Alpheus Administration, a private company that administers assets for private clients and charitable foundations. In addition, he serves as a trustee of the A.G. Leventis Foundation, a member of the Board of Overseers of the Gennadus Library in Athens and a member of the Campaign board of the University of Exeter. He is a co-founder of the Cyclades Preservation Fund. Nationality: British ### 10. Christo Leventis Non-Executive Director Appointed: June 2014 Skills, experience and contribution: Christo worked as an investment Analyst with Credit Suisse Asset Management from 1994 to 1999. In 2001, he joined J.P. Morgan Securities as an Equity Research Analyst focusing on European beverage companies. From 2003 until March 2014, Christo was a member of the Board of Directors of Frigoglass S.A.I.C., a leading global manufacturer of commercial refrigeration products for the beverage industry. Christo holds a BA in Classics from University College London and an MBA from the Kellogg School of Management in Chicago. External appointments: Christo is the Chairman of Alpheus Capital, a single-family private equity investment office. Nationality: British 90 COCA-COLA HBC ### Board of Directors continued 11 12 13 | 11. Alexandra Papalexopoulou | 12. Bruno Pietracci | 13. Ryan Rudolph | | --- | --- | --- | | Independent non-Executive Director | Non-Executive Director | Non-Executive Director | | Appointed: June 2015. | Appointed: June 2021. | Appointed: June 2016. | | Skills, experience and contribution: Alexandra | Skills, experience and contribution: Bruno has | Skills, experience and contribution: From 2006 | | worked previously for the OECD and the | amore than 20‑year track record of transforming | until 2019, Ryan was an attorney and partner at | | consultancy firm Booz, Allen & Hamilton, in Paris. | businesses, people and communities and brings | thelaw firm Oesch & Rudolph. From 1993 until | | From 2003 until February 2015, she served as a | experience and knowledge of the Coca-Cola | 2006, he worked as an attorney at the business | | member of the board of directors of Frigoglass | system, having held a number of roles at The | lawfirmLenz & Staehelin in Zurich. Prior to that, | | S.A.I.C. From 2010 to 2015, she served as a | Coca-Cola Company since 2008. From 2018 | heworked as a public relations consultant at the | | member of the board of directors of National Bank | to2020, he was President of The Coca‑Cola | public relations agency Huber & Partner in Zurich, | | of Greece and from 2007 to 2009, she served as | Company’s Southern and East Africa Business | asmarketing assistant and subsequently as | | amember of the board of directors of Emporiki | Unit and from 2016 to 2018, he served as the | manager at Winterthur Life Insurance as well as | | Bank. Alexandra holds a BA in Economics and | Vice-President of Operations in Europe, Middle | part-time with D&S, the Institute for Marketing | | Mathematics from Swarthmore College in the US | East and Africa. Prior to that, he was the General | andCommunications Research in Zurich. Ryan | | and an MBA from INSEAD in France. | Manager for Colombia, Venezuela and Ecuador | obtained an LLM from the University of Zurich | | | (from 2014 to 2016) and General Manager of FU | andis admitted to the Zurich bar. Ryan also | External appointments: Alexandra is the Strategic Center in Brazil (from 2012 to 2014). From 2010 studied at the Faculté des Lettres of the University Planning Director at Titan Cement Company S.A., to2012, he was the General Manager of FU South of Geneva, as well as the Ecole Polytechnique where she has been employed since 1992 and in Brazil. Bruno joined The Coca‑Cola Company inLausanne. hasserved as Executive Director since 1995. in2008 as Vice‑President of Strategy, Insights Alexandrais treasurer and a member of the External appointments: Ryan is an attorney andInnovation in Brazil. Prior to that he worked boardof directorsof the Paul and Alexandra andpartner at the Zurich‑based law firm RCS atMcKinsey & Company in Brazil and Portugal Canellopoulos Foundation, a member of the board Trust &Legal AG. In addition, he serves as a from 1997 to 2008, working in marketing and of directors of the INSEAD business school and a member ofthe Foundation Board of the A.G. saleswithconsumer‑packaged goods and member of the board of trustees of the American Leventis Foundation and as a member of the telecommunications clients. He has served on the College of Greece. board ofvarious privately‑held companies and board of Coca‑Cola Beverages Africa since 2017 charitablefoundations. Nationality: Greek and has also served on the boards of Toni Corp Nationality: Swiss inEcuador (2016) and Matte Leão in Brazil (2009). In2016, he was the Chairman of Corporación Juego y Niñez in Colombia. Bruno holds a Board committees bachelor’s degree in mechanical engineering from the Universidade Estadual de Campinas in Brazil Audit and Risk Committee page 108 and an MBA from INSEAD in France. Nomination Committee page 114 External appointments: Bruno currently serves Social Responsibility Committee page 116 as President of the Africa Operating Unit for Remuneration Committee page 118 TheCola‑Cola Company, a role which he has heldsince 2020. Committee Chair Nationality: Brazilian and Italian ### Diversity, tenure and experience of the Board Board gender diversity Board tenure Board age profile Board nationality profile Board experience 0-1 years 2 40 to 49 years old 3 American 1 Finance, investments 12 andaccounting 1-2 years 1 50 to 59 years old 5 American/Brazilian 1 International exposure 13 | 3-4 years 1 | 60 to 69 years old 5 | Brazilian/Italian 1 | | | | --- | --- | --- | --- | --- | | | | | FMCG knowledge/ | 6 | | 4-5 years 1 | 70 years old or more 0 | British 4 | | | experience | 5-6 years 3 | Croatian 1 | | | | --- | --- | --- | --- | | | | Risk oversight | 12 | | 6-7 years 2 | Greek 2 | andmanagement | | | 7-8 years 2 | Nigerian 1 | Sustainability and | 8 | community engagement Men 9 14-15 years 1 Swiss 2 Women 4 Corporate governance 7 91INTEGRATED ANNUAL REPORT 2021 letter of appointment. Each Director should have demonstrable ### General qualifications required experience, skills and knowledge which enhance Board effectiveness ### ofallDirectors and will complement those of the other members of the Board to Coca‑Cola HBC’s Board Nomination Policy requires that each ensure an overall balance of experience, skills and knowledge on the Director is recognised as a person of the highest integrity and Board. In addition, each Director must demonstrate familiarity with standing, both personally and professionally. Each Director must be and respect for good corporate governance practices, sustainability ready to devote the time necessary to fulfil his or her responsibilities and responsible approaches to social issues. to the Company according to the terms and conditions of his or her Business characteristics Qualifications, skills and experience Directors | Our business is extensive and involves complex financial | Experience in finance, investments | 12 | | --- | --- | --- | | transactions in the various jurisdictions where we operate | andaccounting | | | Our business is truly international with operations | Broad international exposure, and emerging | 13 | | in29countries, at different stages of development, | and developing markets experience | | onthreecontinents | Our business involves the preparation, packaging, | Extensive knowledge of our business and the | 6 | | --- | --- | --- | | saleanddistribution of the world’s leading non‑alcoholic | fast-moving consumer goods industry, as well | | | beveragebrands | as experience with manufacturing, route-to- | | market and customer relationships Our Board’s responsibilities include the understanding and Risk oversight and management expertise 12 oversight of the key risks we are facing, establishing our risk appetite and ensuring that appropriate policies and procedures are in place to effectively manage and mitigate risks | Building community trust through the responsible and | Expertise in sustainable sourcing and | | 8 | | --- | --- | --- | --- | | sustainable management of our business is an indispensable | packaging, CO | 2 emissions and experience | | | part of our culture | inwider stakeholder engagement | | | | Our business involves compliance with many different | Expertise in corporate governance and/or | | 7 | | regulatory and corporate governance requirements across | government relations | | | anumber of countries, as well as relationships with national Expertise in ESG matters and sustainable governments and local authorities andresponsible business practices Environmental, social and corporate governance (ESG) are prominent in our business, in particular workforce matters, environmental and climate change issues and supply chainsustainability Environmental, social and corporate governance (ESG) As part of this effort, the Social Responsibility Committee proposed and the Board approved science‑based targets for the Company to skills and experience reduce its value chain emissions inScopes 1, 2 and 3 by 2040. Anna As evidenced by our commitment to achieve net zero emissions Diamantopoulou’s familiarity with the social protection and welfare by2040, which was announced in October 2021, the Company’s state at the EU Commission High‑Level Group, in addition with the approachto managing our environmental impact is ambitious. expertise of a number of our Board members, that sit at the Boards Insupport of this ambition, which builds on our long history of other multi-nationals that face similar challenges and have similar ofsustainability management, the Board approved a robust plan concerns on the ESG agenda, helped us identifying the commitments in2021 in order to achieve its targets by 2040. that we want to make in the area and set the relevant targets, 92 COCA-COLA HBC ## Corporate governance report | Director | Appointed | Board Attended/ Total meetings | Audit and Risk Attended/ Total meetings | Remuneration Attended/ Total meetings | Nomination Attended/ Total meetings | Social Responsibility Attended/ Total meetings | | --- | --- | --- | --- | --- | --- | --- | | **Anastassis G. David^{1}** | January 2016 | 7/7 | | | | | | **Zoran Bogdanovic** | June 2018 | 7/7 | | | | | | **Charlotte J. Boyle** | June 2017 | 7/7 | | 4/4 | 4/4 | | | **Henrique Braun^{1}** | June 2021 | 4/4 | | | | | | **Anna Diamantopoulou** | June 2020 | 7/7 | | 4/4 | 4/4 | 4/4 | | **Olusola (Sola) David-Borha** | June 2015 | 7/7 | 8/8 | | | | | **William W. (Bill) Douglas III** | June 2016 | 7/7 | 8/8 | | | | | **Reto Francioni** | June 2016 | 7/7 | | 4/4 | 4/4 | | | **Anastasiou I. Leventis** | June 2014 | 7/7 | | | | 4/4 | | **Christo Leventis** | June 2014 | 7/7 | | | | | | **Alexandra Papalexopoulou** | June 2015 | 7/7 | 8/8 | | | | | **Bruno Pietracci^{1}** | June 2021 | 4/4 | | | | 3/3 | | **José Octavio Reyes^{2}** | June 2014 | 3/3 | | | | 1/1 | | **Alfredo Rivera^{3}** | June 2019 | 3/3 | | | | | | **Ryan Rudolph** | June 2016 | 7/7 | | | | | 1. Henrique Braun and Bruno Pietracci were appointed to the Board at the Annual General Meeting on 22 June 2021. 2. José Octavio Reyes retired from the Board and from the Social Responsibility Committee at the Annual General Meeting on 22 June 2021. 3. Alfredo Rivera retired from the Board at the Annual General Meeting on 22 June 2021. 4. Anastassis David was appointed as Chairman in 2018 having been appointed to the Board in 2006. ## Board composition ### Membership of the Board On 31 December 2021, our Board comprised 13 Directors: the Chairman, one Senior Independent Director, 10 non-Executive Directors and one Executive Director. The biographies of each member of the Board are set out on pages 88 to 90. The non-Executive Directors, of whom six (representing half of the members of the Board, excluding the Chairman) are determined by the Board to be independent, are experienced individuals from a range of backgrounds, countries and industries. The composition of the Board complies with the UK Corporate Governance Code's recommendation that at least half of the Board, excluding the Chairman, comprise independent Directors. At the Annual General Meeting held on 22 June 2021, Henrique Braun and Bruno Pietracci were appointed as non-Executive Directors. José Octavio Reyes and Alfredo Rivera retired as non-Executive Directors, and José Octavio Reyes retired as a member of the Social Responsibility Committee on the same date. There were no other changes to the Board during 2021. The changes to committee membership are set out in each committee report. ### Outside appointments The Articles of Association of the Company (article 36) set limits on the maximum number of external appointments that members of our Board and executive management may hold. In addition, if a Board member wishes to take up an external appointment, he or she must obtain prior Board approval. The Board will assess all requests on a case-by-case basis, including whether the appointment in question could negatively impact the Company or the performance of the Director's duties to the Group. The nature of the appointment and the expected time commitment are also assessed to ensure that the effectiveness of the Board would not be compromised. Details of the external appointments of our non-Executive Directors are contained in their respective biographies set out on pages 88 to 90. Our Chairman serves as Vice-Chairman of Aegean Airlines S.A., Vice-Chairman of the Cyprus Union of Shipowners and Chairman of the Board of Sea Trade Holdings Inc., a shipowning company of dry cargo vessels. He is also a member of the Board of Trustees of College Year in Athens. In this context, the Board considers that fewer than four of the positions held by the Chairman are considered to be significant. 93INTEGRATED ANNUAL REPORT 2021 A number of our other Directors also have other external roles but Shareholders’ nominees having considered the scope of the external appointments of all As described under the heading ‘Major shareholders’ on page 245, Directors, including the Chairman, our Board is satisfied that they do since the main listing of the Company on the Official List of the not compromise the effectiveness of the Board as each Director has London Stock Exchange in 2013, Kar‑Tess Holding, The Coca‑Cola sufficient time to devote to his or her role on the Board as the Board Company and their respective affiliates have no special rights in requires. According to the terms of appointment the Directors are relation to the appointment or re-election of nominee Directors, expected to devote such time as necessary for the performance of andthose Directors of the Company who were originally nominated their duties. This will include attendance annually at approximately 10 at the request of The Coca‑Cola Company orKar‑Tess Holding will Board meetings, Annual General Meetings and other ad hoc meetings. be required to stand for re-election on an annual basis in the same As can be seen in the table of attendance of Board and Board way as the other Directors. The Nomination Committee is responsible Committee meetings on page 92, the Directors were able to devote for identifying and recommending persons for subsequent nomination the time required of them to their role on the Board. TheBoard has by the Board for election as Directors by the shareholders on an determined that each member of the Board commits sufficient time annual basis. and energy to the role and continues to make avaluable contribution As our Board currently comprises 13 Directors, neither Kar‑Tess to the Board and its committees. Holding nor The Coca‑Cola Company is in a position to control (positively or negatively) decisions of the Board that are subject Independence tosimple majority approval. However, decisions of the Board that Our Board has concluded that Charlotte J. Boyle, Olusola (Sola) aresubject to the special quorum provisions and supermajority David‑Borha, Anna Diamantopoulou, William W. (Bill) Douglas III, requirements contained in the Articles of Association, in practice, RetoFrancioni and Alexandra Papalexopoulou are deemed require the support of Directors nominated at the request of at least tobeindependent in accordance with the criteria set out in the one of either The Coca‑Cola Company or Kar‑Tess Holding in order UKCorporate Governance Code, with such individuals being to be approved. In addition, based on their current shareholdings, independentin both character and judgement. neither Kar‑Tess Holding nor The Coca‑Cola Company is in a The other non-Executive Directors, Anastassis G. David (Chairman), position to control a decision of the shareholders (positively Henrique Braun, Anastasios I. Leventis, Christo Leventis, Bruno ornegatively), except to block a resolution to wind up or dissolve Pietracci and Ryan Rudolph, were appointed at the request of theCompany or to amend the supermajority voting requirements. shareholders of the Company: Kar‑Tess Holding and The Coca‑Cola Thelatter requires the approval of 80% of shareholders where Company. They are therefore not considered, by the Board, to be allshareholders are represented and voting. Depending on the independent as defined by the UK Corporate Governance Code. attendance levels at Annual General Meetings, Kar‑Tess Holding orThe Coca‑Cola Company may also be in a position to control Anastassis G. David was appointed as Chairman on 27 January 2016. other matters requiring supermajority shareholder approval. The Board firmly believes that Anastassis David embodies the Company’s core values, heritage and culture and that these Anastassis G. David, Anastasios I. Leventis, Christo Leventis and attributes, together with his strong identification with the Company Ryan Rudolph were all originally appointed at the request of Kar-Tess and its shareholders’ interests, and his deep knowledge and Holding. Henrique Braun and Bruno Pietracci have been appointed at experience of the Coca-Cola System, ensure an effective and the request of The Coca-Cola Company. appropriately balanced leadership of the Board and the Company. Anastassis David was first appointed as a member of the Board Separation of roles in2006 before being appointed Chairman in 2016. Prior to his There is a clear separation of the roles of the Chairman and the Chief appointment as Chairman, major shareholders were consulted, and Executive Officer. The Chairman is responsible for the operation an external search consultancy engaged to find suitable candidates. ofthe Board and for ensuring that all Directors are properly informed The consensus and recommendation was that Anastassis David and consulted on all relevant matters. The Chairman, in the context wasthe appropriate candidate to become Chairman and that he of the Board meetings and as a matter of practice, also meets continues to be effective in his leadership of the Board. Anastassis separately with the non-Executive Directors without the presence David has the continuing support of the Board and major ofthe Chief Executive Officer and promotes the culture of openness shareholders to remain as Chairman. and debate within the Board sessions as well as outside the formalsessions. The Chairman is also actively involved in the work of the Nomination Committee concerning succession planning and the selection of key people. The Chief Executive Officer, Zoran Bogdanovic, is responsible for the day-to-day management and performance of the Company and for the implementation of the strategy approved by the Board. 94 COCA-COLA HBC ### Corporate governance report continued Key roles and responsibilities Board of Directors The governance process of the Board is set out in our Articles of Our Board has ultimate responsibility for our long‑term success and for Association and the Organisational Regulations. These regulations define delivering sustainable shareholder value as well as contributing to wider the role and responsibilities of the Board and its committees. These society. The Board is responsible for setting the Company’s purpose, documents, together with the responsibilities of the Chairman, Chief valuesand strategy and ensures the alignment with its culture; this includes Executive Officer and Senior Independent Director, and can be found at ensuring that workforce policies and practices are consistent with the https://coca‑colahellenic.com/en/about‑us/corporate‑governance/ Company’s values and support its long-term sustainable vision. Further corporate-governance-overview/. In addition, the Swiss Ordinance against details are set out on pages 95 to 97. This is achieved by approving the Excessive Compensation in Listed Companies imposes certain obligations corporate strategy, monitoring performance toward strategic objectives, on the Board, including a requirement to prepare and make available a overseeing implementation of the strategy by the Executive Leadership remuneration report pursuant to Swiss law. Team and approving matters reserved by the Articles of Association fordecision by the Board. Specific tasks are delegated by the Board to itscommittees for audit and risk, nomination, remuneration and socialresponsibility. Chairman Chief Executive Senior Independent Non‑Executive Company Secretary • leads the Board, sets Officer Director Directors • ensures that correct the agenda and Board procedures are • leads the business, • acts as a sounding • contribute to promotes a culture of followed and ensures implements strategy board for the Chairman developing Group openness and debate; the Board has full and and chairs the and appraises his strategy; • is responsible for overall timely access to all Executive Leadership performance; • scrutinise and effectiveness in leading relevant information; Team; and • leads the independent constructively the Company and • facilitates induction and • communicates with the non-Executive challenge the setting the culture; training programmes, Board, shareholders, Directors on matters performance of • ensures the highest and assists with the employees, that benefit from an management in the standards of corporate Board’s professional government independent review; execution of the governance; development authorities, other and Group’s strategy; and requirements; and • is the main point of stakeholders and • is available to • oversee succession contact between the thepublic. • advises the Board on shareholders if they planning, including the Board and governance matters. have concerns which appointment of management; and have not been resolved Executive Directors. • ensures effective through the normal communication with channels of shareholders and communication. stakeholders. Board committees Board committees and the other members of the Board, the Audit and Risk Our Board has delegated specific tasks to its committees as set out in the Committee, the Nomination Committee, the Remuneration Committee Organisational Regulations and reports from these committees are set out and the Social Responsibility Committee are set out on pages 108 to 140. in this Corporate Governance Report. Biographies of the Chairs of the Audit and Risk Committee Remuneration Committee Nomination Committee Social Responsibility Responsibilities Responsibilities Responsibilities Committee • Oversight of the accounting • Establishment of the • Identification and nomination of Responsibilities policies, financial reporting and remuneration strategy for the new Board members, including • Supports the Board in its disclosure controls; the Group’s Group; determines and agrees recommending Directors responsibilities to safeguard approach to internal controls with the Board the tobemembers of each Board theGroup’s reputation for and risk management; and the remuneration of Group committee. responsible and sustainable quality, adequacy and scope Executives and approves • Ensuring adequate Board operations. ofinternal and external remuneration for the Chairman training; supporting the Board • Oversight of the Group’s auditfunctions. and the Chief Executive Officer. and each committee in engagement with stakeholders • Oversight of the Company’s • Makes recommendations to conducting a self-assessment. to assess their expectations, compliance with legal, the Board regarding • Oversight of the establishment and the possible consequences regulatory and financial remuneration matters to be of a talent development of these expectations for reporting requirements, and the approved at the Annual framework for the Group. theGroup. work programme of the internal GeneralMeeting. • Oversees effective succession • Establishes principles governing audit function. • Implementation or modification planning for the Chief Executive social and environmental • External auditor reports directly of any employee benefit plan Officer, in consultation with the management and oversees to the Committee. resulting in an increased annual Chairman, and for the Executive development of performance cost of €5 million or more. Leadership Team, in management to achieve social consultation with the Chief and environmental goals. Executive Officer. Executive Leadership Team providing adequate head‑office support for each of the Group’s countries; The Executive Leadership Team, led by the Chief Executive Officer, meets working closely with the country General Managers, as set out in our 12 times each year and provides the Group with executive leadership. operating framework; and the setting of annual targets and approval TheCommittee has responsibility for: the development of long‑term ofannual business plans which form the basis of the Group’s strategies and the implementation of strategies approved by the Board; performancemanagement. 95INTEGRATED ANNUAL REPORT 2021 ## Applied governance ### Summary of key Board activities for 2021 and priorities for 2022 Topic 2021 activity 2022 priority | | Strategy | • Review the progress towards becoming the leading | | • On-going review of the integration plans in Egypt | | --- | --- | --- | --- | --- | | | | | 24/7 beverage partner and leveraging our unique | and monitoring the launches of Caffè Vergnano in | | | | | 24/7portfolio | our markets | | | | • Close monitoring of plans to address packaging | | • Continued close alignment with The Coca-Cola | | | | | challenges and reduce one-way plastic packaging | Company | | | | • Review of the strategic acquisitions in Egypt and the | | • Monitoring progress towards our Growth Story | | | | | coffee business expansion through the minority | 2025 | | | | | stakeinvestment in Caffè Vergnano | • Monitoring progress towards our NetZeroby40 | | | | • Endorsing the Group’s NetZeroby40 targets | | commitments | | Performance | | • Deep dive reviews of regions and key functions | | • Periodic performance reviews with focus | | | | • Regular reviews of the business performance | | ontheGroup’s key business indicators | | | | | byreporting segments and monitoring of the | • Review of the performance of the Company’s | | | | | performance of the coffee and snack businesses | innovation initiatives and focusing on the | | | | • Acceleration of commercial execution capabilities | | e-commerce performance | | | | | across the organisation based on insights from | • Focusing on the performance of the Revenue | | | | | theGroup’s big data and advanced analytics work | Growth Management, Route-to-Market and big | | | | • Following the Group’s Innovation for Growth plans | | data and advanced analytics programme in order | to build the necessary insight capabilities Risk management • Continued review of principal and emerging risks • Enhancing the cyber security programme in order andmitigation programmes to meet the needs for the accelerated digitalisation andinternal • Reviewing the liquidity, financing status and commodity of the business control exposure of the Group • Monitoring the progress of the new sales academy • Reviewing information technology plans, including for the Group’s business developers cyber security • Review of the digital strategy and its key priorities • Ongoing review of key principal risks, including risks around consumer and customer centricity, relating to the COVID-19 pandemic employee experience and operational productivity • Reviewing the execution initiatives in modern trade, e-commerce and growth results | | Operational | • Implementation of cost optimisation programmes | | | • Review of material capital expenditure projects | | --- | --- | --- | --- | --- | --- | | | | | andCapEx investments | | • Consolidation and integration of new acquisitions | | | | • Review of projects involving the in-house production | | | • Ongoing review of the Group’s cost optimisation | | | | | ofPET from recycled PET flakes and production | | and investment programmes | | | | | ofCO | 2 collected from the air | | | Culture and values | | • Discussing the employee engagement surveys | | | • Monitoring talent and people capability plans | | | | | andpeople plans | | • Ongoing review of Performance for Growth, the | | | | • Overviewing the plans to adapt the Group’s | | | Group’s new performance management process | | | | | organisational design to make it stronger for | | • Reflecting on the implementation of the Group’s | | | | | thefuture. | | organisational design | • Working with the designated non-Executive Director on issues that are identified through the employee engagement process Succession • Reviewing succession planning for Board and • Ongoing succession planning work and preparing seniormanagement succession planning and bench strength initiatives planning and • Reviewing the Company’s talent development plans for senior management and Board vacancies diversity • Discussing Board effectiveness and successionpipeline 96 COCA-COLA HBC ### Corporate governance report continued ### Applied governance ## Board oversight of ## territory expansion to Egypt In August 2021, we announced the acquisition of approximately Given The Coca‑Cola Company’s holding in both CCBCE and 94.7% of Coca‑Cola Bottling Company of Egypt S.A.E. (CCBCE), theGroup, the particular arrangements between The Coca‑Cola aleading producer of non‑alcoholic ready‑to‑drink beverages in Company and the Group were considered to be a smaller related Egypt. The transaction completed in January 2022. The remaining party transaction for the purposes of the UK Financial Conduct shares in CCBCE are held by some minority holders and we intend to Authority’s Listing Rules. As required by the Listing Rules, the Board acquire these shares in due course. This is a strategically significant was required to seek the advice of its sponsor that the proposed transaction for the Group which expands our emerging markets terms of the transaction were fair and reasonable as far as the footprint and increases our exposure to high-growth geographies. shareholders of the Group are concerned. The Board sought andcarefully considered the fair and reasonable opinion received Strategically significant from its sponsor in connection with the acquisition before The Board considered the acquisition of CCBCE to be a good endorsingthesame. strategic fit for the Group as it supports the vision of being the leading 24/7 beverage partner and the Growth Story 2025 strategy. Key issues considered by the Board In particular, the Board took into account that the transaction would The Board received regular updates and reports from both give the Group access to the second largest non-alcoholic ready- management and its legal advisers, accountants and financial to-drink market in Africa by volume and would expand the Group’s advisers during the due diligence process in relation to the acquisition. exposure to high-growth, emerging markets. It was also felt that The Board was keen to ensure that management had established there was significant opportunity to leverage the Group’s proven arobust due diligence process that was designed toidentify and route-to-market capabilities and 70 years of experience operating assess potential risks and issues that could affect thevaluation inemerging markets to increase penetration of The Coca‑Cola orunderlying assumption of the acquisition, and considered Company’s brand portfolio in the country. Overtime the Group is potential mitigation actions and vice versa to those risks and issues. also confident that it will mange to create further value by moving TheBoard questioned and challenged management onthese issues. CCBCE’s margins towards the Group average. Regulatory conditions Timeline and key board activities The acquisition was subject to certain regulatory and other conditions. The Board first considered the acquisition in 2019. Following these Throughout the acquisition process, the Board has received updates initial discussions it authorised management to analyse and consider from management on the status of the regulatory approvals required this opportunity further with particular emphasis on negotiating and the satisfaction of the various transaction conditions. thetransaction with CCBCE’s majority shareholder and The Coca-Cola Company. Stakeholders and stakeholder engagement CCBCE is expected to continue doing business with its current Following discussions with CCBCE and its major shareholders, suppliers, in line with the Group’s supplier guiding principles. andhaving undertaken a due diligence process, a headline proposal TheGroup also has established potential opportunities for local was put to the Board for approval in March 2021 for consideration. Egypt suppliers to service the wider Group. By leveraging the Group’s The Board approved that proposal and authorised management knowledge and capabilities, as well as their experience in emerging tonegotiate the details of the transaction and final structure with markets, CCBCE can unlock further growth, reach category leadership themajor shareholders of CCBCE. positions and create value for all employees, customers and partners The transaction was signed in August 2021 and was completed of the Coca-Cola System in Egypt. inJanuary 2022. Robust governance: managing conflicts of interest One of the Group’s major shareholders, The Coca-Cola Company, had a significant stake in CCBCE which was acquired as part of theacquisition. As such, enhanced governance and oversight arrangements were put in place in relation to the acquisition and theGroup’s conflicts of interest policies were followed. The Group’s approach to conflicts of interest is discussed in the conflicts ofinterests section of this report on page 103. In particular, the members of the Board nominated by The Coca‑Cola Company didnot take part in the decision‑making process in relation to theacquisition and recused themselves from the relevant Board meetings that discussed the progress of the acquisition and approved the transaction terms. 97INTEGRATED ANNUAL REPORT 2021 ## Future‑focused ## governance ### “ Several Board members, ### including myself, are connected ### to our Company’s founders. ### This gives our Board a unique ### long-term perspective and ### sense of ownership.” Anastassis G. David, Chairman of the Board Our 70th year: Our portfolio of well-loved, highly visible Culture will continue to play a crucial role brands comes with obligations and inour ability to seize opportunities, ensure The Board’s role in ensuring responsibilities to earn and maintain customer centricity and maintain the success over the next 70 years thetrust of our stakeholders, including agilityneeded to adapt swiftly. The Board As we reflect on our journey from our origins thecommunities where we operate. understands that culture comes from the in Lagos, Nigeria, in 1951, we believe that Tomaximise the Company’s impact top, and must be actively demonstrated itis the Board’s role to safeguard the andtackle complex problems, the Board andcascaded to be fully embedded. Company’s future for the next 70 years isfocused onincreasing partnerships and andfurther. Coca-Cola HBC has a legacy As guardians of enduring success in all its collaboration. Our Company only succeeds oftransparency and agility, and an many forms, the Board seeks to ensure when our customers, partners and ownership structure that has long-term ithas the right skills at Board level to communities are successful. accountability at its heart, allowing us to ensure the right questions are asked and make investments for the longterm. Purposeful organisations perform better our long-term strategy remains relevant. and have advantages attracting the Wealso view diversity, equality and inclusion The Board’s priorities reflect its increasingly scarce talent and skills needed as pre-requisites to achieve a fairer society understanding of what is needed to as more aspects of our industry are digitised. and the broad range of perspectives ensureresilience while pursuing growth needed to drive meaningful innovation. andexpansion. 98 COCA-COLA HBC ### Corporate governance report continued ### Applied governance ## Oversight of the ## Company’s culture • Employee retention – our employees are our greatest asset ### How the Board measures andassesses culture anditis important that we do everything we can to retain them. The Board is responsible for monitoring and assessing our culture. Weconduct an annual employee engagement survey of the The Chairman ensures that the Board is operating appropriately workforce, although during 2021 a total of three all-employee andsets the Board’s culture which in turn forms the culture of the surveys were conducted to provide feedback to senior Company. The Chief Executive Officer supported by members of management to identify whether further actions were required. the Executive Leadership Team is responsible for ensuring culture The feedback was reviewed by the Executive Leadership Team isembedded throughout the business and its operations and in all with the findings reported to the Board. our dealings with our stakeholders. • Customer retention – assessments of customer satisfaction and The Board measures the culture of the Group using internal and ongoing conversations with regulators and non-governmental external metrics which also enable it to identify further actions to organisations. As we increased the number of all-employee ensure culture remains appropriate. The Board also monitors the surveys during the pandemic to ensure that we had adequate Group’s performance against its peer group within the same sector. insight into employee needs, we also introduced a new customer The Board considers the following: feedback approach from Customer Gauge across all our markets to receive customer feedback on an ongoing basis. This software- • Health and safety – an area of paramount importance to our as-a-service tool gives us deeper, more frequent insight than our people, customers, partners, and consumers of our products, annual customer survey, leading to more actionable insights which especially given the continuing impact of the COVID-19 can be addressed quickly. Many of our customers were severely pandemic. We continue to adapt business operations to ensure impacted by lockdowns and restrictions on their ability to operate. that our people, customers and partners can perform their roles We continue to work with our customers, consumers, suppliers, safely and effectively. We closely monitored the developing local community representatives and other business partners situation and challenges to ensure we provided the appropriate across the value chain every day. Their input, cooperation and requirements and support. trust factors into Board decision‑making and the success of the business. Examples of governance in action are on pages 95 to 96. • We stood by our out-of-home • We increasingly worked to digitise ## Culture in action customers as restrictions disrupted ourroute to market in the theiroperations and helped them reopen e-commercechannel, strengthening Doing the right thing as restrictions ease. We introduced our ourpartnershipswith e-retailers Throughout the global pandemic, our HoReCa (hotel, restaurant and café) andfooddelivery platforms culture of adaptability has been the driving fortomorrow framework to support factor in our success. Ensuring the safety channel acceleration, focusing on being Sustainability of our people, as well as customers, afull-service partner to our customers. • We accelerated our #YouthEmpowered partners and communities, continued • We introduced the new Sales Academy programme using both in-person and tobea top priority in 2021. The COVID-19 across all our markets, to drive our online modules. The programme reached pandemic demonstrated the value of our salesforce’s capability to deliver improved more than 210,000 people in 2021 customer partnerships, while underlining customer service, performance and • To improve our supply of rPET we have the need to continue to further develop execution. This has been developed as a introduced innovative technology ourcritical capabilities. Our teams have transformative digital learning approach on-site at our Krakow plant in Poland, emerged from two years of a global to help build our teams’ capabilities and will introduce this into more markets pandemic even stronger. | | | onthe job. | in 2022-23 | | --- | --- | --- | --- | | Throughout, our actions have been guided | • In 2021 we made step changes to | | | | by our values. Below are some examples | | empower our salespeople to drive | | | ofculture in action during 2021: | | customer-centric behaviours and ‘close | | the loop’ to resolve issues immediately. Resilience, adaptability and agility • We increased the coverage of our • We protected the health and wellbeing business-to-business Customer Portal ofour people as the COVID-19 pandemic platform, which has transformed into continued, while further investing to anengagement-driven digital platform support the new ways of working. for businesses. We quadrupled digital transactions in 2021. 99INTEGRATED ANNUAL REPORT 2021 ### Applied governance ## Workforce ## engagement Engagement with key stakeholder groups strengthens our The Board closely monitors and reviews the results of the Company’s relationships and is an ongoing part of the operational management Employee Engagement, Values and Ambassadorship surveys. of the Group. This includes employee surveys, assessing customer In addition, the Board reviews talent development initiatives designed satisfaction and ongoing conversations with regulators and to support long-term success. For further details please see below non-governmental organisations. The continuing challenges of and the Growth Pillar 4 section of the report on pages 39 to 44. theongoing COVID‑19 pandemic resulted in a change to the form Charlotte Boyle, our designated non‑Executive Director for ofengagement with some of our stakeholder groups. The Board workforce engagement, attended a number of virtual meetings with receives regular updates from senior management on insights and our European Works Council (EWC). Despite not being able to meet feedback from stakeholders, which allows the Board to understand physically in 2021 until the end of October, meetings continued and consider the perspectives of key stakeholders in decision-making. withthe EWC virtually before that time, including virtual meetings This is a standing agenda item for Board meetings. inMarch and June 2021. Senior leadership present key information Our workforce is core to our strategy and is one of our most on business and other changes at these meetings and hear feedback important stakeholder groups. The Company’s success largely directly from employee representatives. All meetings are attended depends on the passion of our people and our ability to attract, by selected members of the senior leadership team, depending on retainand develop the best talent. The Board therefore understands subjects covered, including our CEO at our meeting in end October. the importance of engaging with its workforce. The safety of our workforce continued to be a focus throughout 2021, ensuring appropriate measures were in place so that they could continue intheir roles and that we were supporting a healthy working environment. Our workforce continued extraordinary efforts to support and aid our customers and consumers during uncertain times caused by the pandemic. During 2021, the insights gained from ## Workforce these engagement activities continued to be ofgreat importance, contributing to the ## engagement Board’s decisions in relation to ensuring ## mechanism the appropriate support and resources for our people, not only for their own safety Charlotte Boyle, our designated non- but to aid them in their roles in helping our Executive Director for workforce customers and consumers. engagement, attended the meetings | during the year with our European Works | Charlotte also frequently interacted with | | --- | --- | | Council. During the course of these | our Group Employee Relations Director, | | meetings Charlotte heard from elected | who is also responsible to monitor | | employee representatives from our | diversity, equity and inclusion, to better | | businesses in EU countries. These | understand the steps that the Company | | meetings allow employee representatives | istaking to become more diverse and | | to understand business updates from | inclusive (see page 41 for activities in this | | senior leaders – including the CEO – about | area). To embed these attributes within | | significant matters affecting our people, | theCompany’s culture, multiple initiatives | | and to ask questions and give feedback. | have been launched to increase awareness | | Charlotte was able to listen to employee | and understanding and improve policies | | representatives about topics raised by | and practices to create a more equitable | | employees and their experience of the | and inclusive workplace for all. The Board | | Company’s approach to the workforce, | takes the lead by recognising good | | particularly during the last couple of years, | practices and driving accountability. | and was able to bring these insights to the Charlotte reported back to the Board on Board’s discussions. herobservations and matters raised by employees, ensuring Board deliberations and decision making are fully informed. 100 COCA-COLA HBC ### Corporate governance report continued ### Listening to our stakeholders, and making ## Engaging with ### ameaningful response, is crucial for ### continuedsuccess ## our stakeholders Description How the Board is kept informed Read more Our people To understand what our people needed 10, 39-43 to work in continually changing circumstances, the Company conducted in total three all-employee surveys in2021. There is a designated non-Executive Director for engagement withour people but given the continued impact of the COVID-19 pandemic, thepractice of presenting survey results tothe full Board continued. The CEO alsoheld engagement sessions with employees during the year, including several calls with Q&A sessions. Our communities Plant visits, community meetings, 10, 46 partnerships on common issues, sponsorship activities, lectures at universities, training opportunities and ### support to young people currently not Considering stakeholders in principal ineducation, training or employment. ### decisions Our consumers Consumer hotlines, local websites, 12, 24-29 Putting our people and customers first planttours, research, surveys, insights, focus groups. The ongoing COVID-19 pandemic continued to create many issues for the Group and in particular for its people and its customers. Since the start of the COVID‑19 pandemic the Board’s top priority has been the safety and wellbeing of our people, customers, Our customers Regular visits, dedicated account teams, 10, 32-37 partners and communities. The Board has remained focussed on joint business planning, joint value- keeping our colleagues safe and healthy, ensuring that processes creation initiatives, customer care centres, customer satisfaction surveys. and procedures are adapted as appropriate and that the right equipment is in place. This was, and remains, key to our ability to continue to serve our customers and to operate the business for all Our suppliers Engagement with our suppliers, 10, 32-37 of the Group’s stakeholders. consultants and counterparts in relatedindustries. Implementing certain new protocols resulted in a reduction in the number of employees working on the ground with customers which in turn had an effect on business development opportunities and NGOs Dialogue, policy work, partnerships opportunities to strengthen the Group’s relationships with its 13, 44-51 oncommon issues, membership of customers. However, the Board and management looked at other business and industry associations. ways for salespeople to engage and communicate effectively with customers. Through this engagement with our customers, it was apparent that having products in the right location was logistically Our shareholders Annual General Meetings, investor problematic. Therefore, in some markets, our teams helped our 12, 100 roadshows and results briefings, customers with their supply chain issues. In order to reduce the webcasts, ongoing dialogue with analysts pressure on some supermarket customers’ supply chains we delivered and investors. direct to stores rather than to the customers’ central warehouses. In many of our markets, some customers remained closed for Governments Trade Associations, recycling and 12, 44-51 significant periods in 2021. Once lockdown measures were eased, recovery initiatives, EU Platform for the priority was for our teams to connect with these customers Action on Diet, Physical Activity and Health, foreign investment advisory tooffer support and assistance to enable reopening of their councils, chambers of commerce. businesses. Our business developers engaged with customers to understand their key priorities and requirements as they prepared | The Coca‑Cola | | Day-to-day interaction as business | | | | --- | --- | --- | --- | --- | | | | | 8, 13 | toreopen after a period of perhaps three to four months’ closure. | | | Company | partners, joint projects, joint business | | | We offered and, in many cases, provided extended credit; helped planning, functional groups on strategicissues, ‘top‑to‑top’ senior with product placement and marketing; and staggered ordering to managementmeetings. ensure no over‑supply and to ease cash flow. By understanding our customers’ needs and taking a collaborative approach, we could plan and adjust accordingly. Together, we adapted our strategy to aid customers’ business recovery and viability rather than focusing solely on our own financial targets. INTEGRATED ANNUAL REPORT 2021 101 ## Stakeholder considerations in the context of acquisitions Stakeholder interests and matters were carefully considered by the Board in the context of the proposed acquisition of the Coca-Cola Bottling Company of Egypt S.A.E. (CCBCE), a leading producer of non-alcoholic ready-to-drink beverages in Egypt. Investors and shareholders were particularly considered as part of this strategically important decision, especially the long-term benefits to the Group from increasing its exposure to high-growth geographies and the opportunities to create value through progressively moving the margins on CCBCE's products towards the Group's average margin. The Group expects that CCBCE will continue doing business with its current suppliers, in line with the Group's Supplier Guiding Principles. The Group also sees potential opportunities for local Egypt suppliers to service the wider CCHBC Group and vice versa. Finally the Group expects certain procurement efficiencies at CCBCE level by leveraging CCHBC's scale and optimisation of the production process and logistics in line with the Group's experience in other markets. Similarly, stakeholder interests were also considered by the Board in the context of the acquisition of a minority shareholding in Caffé Vergnano, a premium Italian coffee company, which was announced in June 2021. The acquisition allowed the Group to further build its presence in the coffee category, one the Board views as important to achieve the Company's 24/7 vision and address an even wider range of consumer tastes and segments. The opportunities and benefits for the Group's customers was a key consideration. The Board considered that the Caffé Vergnano transaction would increase the Group's relevance with its customers within the most attractive segments of the coffee category, while providing Caffé Vergnano with significant expansion potential through the Group's leading route-to-market network and commercial capabilities. ## Future stakeholder engagement The Board regularly reviews the stakeholder engagement activities undertaken both by it and the Group as whole and is satisfied that the activities outlined above and on pages 10 to 13 remain effective for the mutual benefit of the Company and its stakeholders. ## Shareholder engagement The Chairman, the Senior Independent Director and the Chair of the Audit and Risk Committee will be available at the Annual General Meeting of the Company to answer questions from shareholders. The Board encourages shareholders to attend as it provides an opportunity to engage with the Board. However, the 2021 Annual General Meeting was not held in the usual format as no shareholders were permitted to attend due to pandemic-related restrictions in place under Swiss law. The Chief Executive Officer chaired the meeting with a number of other Directors, including the Chairman, as well as members of the Executive Leadership Team and the statutory auditors participating remotely. At the 2021 Annual General Meeting, more than 20% of votes were cast against two resolutions being the advisory votes on the UK Remuneration Report (resolution 7) and on the Swiss Remuneration Report (resolution 9). In accordance with Provision 4 of the 2018 UK Corporate Governance Code, in December 2021 we published an update on the key actions that have been taken by the Board of Directors and Remuneration Committee in response to this. In addition to the comprehensive shareholder consultation subsequently undertaken, the Chair of the Remuneration Committee has further engaged with shareholders to understand their feedback regarding the votes. From this engagement, it is understood that the significant factor regarding the votes was the Committee's decision to adjust the performance metrics relating to PSP vesting in respect of performance up to 31 December 2020. More information on the actions taken in response to this vote is included in the Remuneration Report on page 118. Pursuant to Swiss law and the Articles of Association, shareholders annually elect an independent proxy and we have adopted an electronic proxy voting system for our Annual General Meetings. The Company has a dedicated investor relations function which reports to the Chief Financial Officer. Through the investor relations team, the Company and Board maintain a dialogue with institutional investors and financial analysts on operational financial performance and strategic direction items. We engaged with the investment community and our shareholders throughout the year, as outlined in the diagram below. The feedback from shareholders has been regularly considered by the Board and, where necessary, appropriate action to further engage with shareholders was taken. ### Key investor relations activities in 2021 #### February - Management Roadshow Europe & UK #### March - UBS Global Consumer and Retail Virtual Conference - Credit Suisse 2021 Consumer Retail Conference #### May - EU & US Management virtual roadshow - IR virtual roadshow - Investic virtual seminar: Beverages on the rebound – CCH's IR Director to participate in a panel discussion #### June - Goldman Sachs Global Consumer ESG Conference - Exane BNP Paribas European CEO Conference - Annual General Meeting in Zug - Deutsche Bank Access Global Consumer conference - Exane BNP Paribas 22nd European CEO Conference - Goldman Sachs Global Consumer ESG Conference - Evercore ISI Consumer & Retail Summit - UBS Sustainable Finance Virtual Conference 2021: The Trajectory of Transition #### September - Barclays Global Consumer Staples Conference #### November - EU & US Management Virtual Roadshow #### December - Citi's Global Consumer Conference 182 COCA-COLA MBC # Corporate governance report continued ## Board, committee and Director performance evaluation At least annually, on the basis of an assessment conducted by the Nomination Committee, the Board reviews its own performance as well as the performance of each of the Board committees. This review seeks to determine whether the Board and its committees function effectively and efficiently. During the year, the Chairman meets with the Directors to receive feedback on the functioning of the Board and its committees, the boardroom dynamics, and the Group's strategy. Particular focus is given to areas where a Director believes the performance of the Board and its committees could be improved. A report is prepared for the Board on its effectiveness and that of its committees. For the past six years, the evaluation of the Board's effectiveness has been facilitated by Lintstock, and details of the 2021 Lintstock report are set out on page 103. Lintstock has no other connection to the Company or individual directors. A summary of the Board evaluation findings for 2020, the actions taken in response to improve Board effectiveness in 2021, the Board evaluation findings for 2021, and the resulting priorities for 2022 is as follows: 2020 Board evaluation findings | • Oversight of talent • Understanding of technological developments • Considering implications of COVID-19 | • Endorsing the geographic expansion of the Group to Egypt • Risk management response to the pandemic • Access to the global talent pool, and implementing a programme of formal / informal exposure to potential successors | | --- | --- | 2021 Board evaluation findings | • Strengthening the technology expertise on the Board • Undertaking site visits and meeting in person • Understanding of broader stakeholder views | • Reviewing the acquisitions • Oversight of people and talent • Strategic discussions | | --- | --- | The Independent Directors meet separately at every regular Board meeting to discuss a variety of issues, including the effectiveness of the Board. An evaluation of each Director, other than the Chairman, is conducted by the Chairman and the Senior Independent Director. The Senior Independent Director leads the evaluation of the Chairman in conjunction with the non-Executive Directors, taking into account the views of the Chief Executive Officer, and, as a matter of practice, meets with the other independent non-Executive Directors when each Board meeting is held to discuss issues together, without the Chief Executive Officer or other non-Executive Directors present. The Chairman also holds meetings with the non-Executive Directors without the Chief Executive Officer present. ## Information and training The practices and procedures adopted by our Board ensure that the Directors are supplied on a timely basis with comprehensive information on the business development and financial position of the Company, the form and content of which is expected to enable the Directors to discharge their duties and carry out their responsibilities. All Directors have access to our General Counsel, as well as independent professional advice at the expense of the Company. All Directors have full access to the Chief Executive Officer and senior management, as well as the external auditor and internal audit team. The Board has in place an induction programme for new Directors. Generally, it involves meeting with the Chairman, members of the Executive Leadership Team and other senior executives, as well as receiving orientation training in relation to the Group and its corporate governance practices. The induction programme also includes meetings with representatives of our sales force, customers and major shareholders, and visits to our production plants. Bruno Pietracci and Henrique Braun participated in the induction programme during 2021 as part of their onboarding process, although much of this was conducted virtually. All Directors are given the opportunity to attend training to ensure that they are kept up to date on relevant legal, accounting and corporate governance developments. The Directors individually attend seminars, forums, conferences and working groups on relevant topics. The Nomination Committee reviews our Director training activities regularly. Finally, as part of the continuing development of the Directors, the Company Secretary ensures that our Board is kept up to date with key corporate governance developments. The Board appoints the Company Secretary, who acts as secretary to the Board. ## Board appointments and succession planning Our Board has in place plans to ensure the progressive renewal of the Board and appropriate succession planning for senior management. These cover the short, medium and long-term and these are regularly reviewed. Appointments and succession plans are based on merit and objective criteria to ensure the Company is promoting diversity (including gender), social and ethnic backgrounds, cognitive and personal strengths. Pursuant to our Articles of Association, the Board consists of a minimum of seven and a maximum of 15 members, and the Directors are elected annually for a term of one year by the Company's shareholders, which is also in accordance with the UK Corporate Governance Code. In case of resignation or death of any member of the Board, the Board may elect a permanent guest, whom the Board will propose for election by the shareholders at the next Annual General Meeting. In accordance with the Organisational Regulations, the Board proposes for election at the shareholders' meeting new Directors who have been recommended by the Nomination Committee after consultation with the Chairman. 103INTEGRATED ANNUAL REPORT 2021 In making such recommendations, the Nomination Committee ### Lintstock report andthe Board must consider objective criteria including the overall balance of skills, experience, independence and knowledge of the Board member, as well as diversity considerations including gender In 2021, we once again engaged the advisory firm Lintstock but also social and ethnic backgrounds. Consideration is also given tofacilitate an evaluation of the performance of the Board. to the overall length of service of the Board as a whole when Lintstock specialises in Board performance reviews and has refreshing its membership. See the Nomination Committee report noother connection with Coca-Cola HBC. on page 114 for further information on the role and work of the Nomination Committee, including the Board Diversity Policy. Through this process, the Board is satisfied that the Board and its The first stage of the review involved Lintstock engaging with the committees have the appropriate balance of experience and skills, Company Secretary to set the context for the evaluation, and to diversity, independence and knowledge of the Company to enable tailor survey content to the specific circumstances of Coca-Cola them to discharge their duties and responsibilities effectively, HBC. The surveys were designed to follow up on and further including sufficient time commitment. explore key themes identified in last year’s evaluation, so that year-on-year progress can be tracked. Conflicts of interest The 2021 surveys addressed core aspects of the Board’s In accordance with the Organisational Regulations, Directors are performance, and had a particular focus on the following areas: required to arrange their personal and business affairs so as to avoid a conflict of interest with the Group. • The Board’s oversight of progress with regard to the Company’s growth pillars, and the priorities for successfully Each Director must disclose to the Chairman the nature and extent delivering Growth Story 2025 of any conflict of interest arising generally or in relation to any matterto be discussed at a Board meeting, as soon as the Director • The Board’s understanding of, and engagement with, becomes aware of its existence. In the event that the Chairman keystakeholder groups, including shareholders, customers, becomes aware of a Director’s conflict of interest, the Chairman is regulators, and suppliers required to contact that Director promptly and discuss with him or • The effectiveness with which the Board monitors employee her the nature and extent of such a conflict of interest. Subject to sentiment and the culture throughout the business exceptional circumstances in which the best interests of the • The dynamics on the Board, and the extent to which the Company dictate otherwise, the Director affected by a conflict of Boardprovides effective support and constructive challenge interest is not permitted to participate in discussions and decision- tomanagement making involving the interest at stake. • The effectiveness of the Board’s virtual meetings, and the As The Coca-Cola Company was a major shareholder of the focus in meetings on key strategic areas such as sustainability Coca‑Cola Bottling Company of Egypt S.A.E. (CCBCE), members and technology ofthe Board appointed by The Coca‑Cola Company did not take part • The Board’s oversight of risk management, including the inthe decision‑making process in relation to the Group’s acquisition Company’s response to the challenges associated with ofCCBCE. For a detailed description of the enhanced governance thepandemic procedures in place for the transaction see page 86. • The Board’s exposure to potential successors for key positionsfrom within the business, and the effectiveness ofthe Company’s talent management processes • The Board’s composition in the context of the Company’s strategic ambitions, including the skills represented and the diversity among members The performance of the committees of the Board was also evaluated, as was the performance of the Chairman. Theanonymity of all responses was guaranteed throughout theprocess to promote open and honest feedback. Lintstock subsequently analysed the results and delivered reports on the performance of the Board, the committees andthe Chairman, which were considered at a subsequent Board meeting. The results of the review were positive overall, and the Boardwas felt to have performed effectively and maintained astrongworking dynamic despite the challenging circumstances presented by the pandemic. While the Board’s virtual meetings were seen to have been successful, resuming in‑person meetings was identified as a top priority for the coming year. Other priority areas for 2022 were identified as continuing the Board’s focus on: strategic matters, particularly growth; the integration of recent acquisitions; people issues, including succession planning and talent; strengthening technology expertise on the Board; and risk management, including any lessons that can be learned from the pandemic. 104 COCA-COLA HBC ### Corporate governance report continued 1 2 3 ## The Executive ## Leadership ## Team 4 5 6 1. The Executive Leadership Team 3. Ben Almanzar 5. Sanda Parezanovic is chaired by Zoran Bogdanovic, (47) Chief Financial Officer (57) Chief People and Culture Officer Chief Executive Officer, and his Senior management tenure: Appointed Senior management tenure: Appointed biography is set out on page 88. April 2021 (less than 1 year) June 2015 (6 years) Other members of the Executive Previous Group roles: None Previous Group roles: Sanda’s previous LeadershipTeam: roles in the Group include: Public Affairs Previous relevant experience: Ben has a &Communications Manager, Serbia and 2. Naya Kalogeraki proven track record and broad experience Montenegro from 2003 to 2006; Country (52) Chief Operating Officer gained from senior financial positions in Human Resources and Public Affairs Senior management tenure: Appointed theglobal fast‑moving consumer goods &Communications Manager, Serbia and July 2016 (5 years), appointed Chief industry. This includes 10 years with Mars Montenegro from 2006 to 2010; and Region Operating Officer September 2020 Incorporated, where he was Regional CFO, Human Resources Director, Bosnia Europe & Southern Africa and most recently Previous Group roles: Chief Customer &Herzegovina, Bulgaria, Croatia, Cyprus, Vice President for Financial Planning, andCommercial Officer from 2016 to 2020. Greece, Northern Ireland, the Republic Analytics and Financial Strategy. Prior to From 1998, when Naya joined the Company, ofIreland, North Macedonia, Moldova, joining Mars, Ben spent 10 years with Nestlé she built her career assuming roles of Montenegro, Nigeria, Romania, Serbia in a variety of finance roles in Europe, increased scale and scope, including andSlovenia from 2010 to 2015. including CFO of Nestlé Czech‑Slovak, Marketing Director, Trade Marketing Director, andCFO for Nestlé Waters in the UK. Previous relevant experience: Sanda Sales Director and Country Commercial started in 1989 as Market Researcher and Director, Greece. She has been heavily Nationality: Dominican Republic and British later Strategic Planner working for various involved in Group strategic projects and task local research and marketing agencies in forces addressing mission-critical business 4. Ivo Bjelis SFR Yugoslavia. She joined Saatchi & Saatchi imperatives. In September 2013, Naya was (54) Chief Supply Chain Officer Balkans in 1994, holding various senior appointed to the role of General Manager, Senior management tenure: Appointed management positions in several Balkan Greece and Cyprus. January 2022 (less than 1 year) countries, including Managing Director | Previous relevant experience: Naya joined | Previous Group roles: Ivo joined the Group | oftwo start‑up agencies, first in North | | --- | --- | --- | | the Company in 1998 from | in 1996 as Plant Manager in Croatia, while in | Macedonia and later in Serbia. In 1999 she | | The Coca-Cola Company where she held | 2002 he took over the position of Country | relocated to London, where she worked for | | anumber of marketing positions up to | Supply Chain Manager. Since 2006 Ivo built | Saatchi & Saatchi and Marketing Drive on | | Marketing Manager. | his career assuming roles of increased scale | anumber of pan‑European and business | | | and scope across the board, including | development projects before she joined our | Nationality: Greek Strategic Initiative Leader for Customer Group in 2003. Centric Supply Chain, Group Supply Chain Nationality: Serbian Processes and Capabilities Director, Regional Supply Chain Director, Group Supply Chain Services Director and Group Supply Chain Operations Director, leading the development and the transformation ofthe Supply Chain strategy over the years. Nationality: Croatian 105INTEGRATED ANNUAL REPORT 2021 7 8 9 10 From left to right 11 12 13 Row one Zoran Bogdanovic, Naya Kalogeraki, Ben Almanzar, Marcel Martin, MinasAgelidis, Nikos Kalaitzidakis, Barbara Tönz Row two Ivo Bjelis, Sandra Parezanovic, JanGustavsson, Vitaliy Novikov, Mourad Ajarti, Spyros Mello | 6. Jan Gustavsson | 8. Minas Agelidis | 9. Nikos Kalaitzidakis | | --- | --- | --- | | (56) General Counsel, Company Secretary | (52) Region Director: Austria, Belarus, | (52) Region Director: Armenia, Bosnia & | | and Chief Corporate Development Officer | Czech Republic, Estonia, Hungary, Island | Herzegovina, Bulgaria, Croatia, Cyprus, | | Senior management tenure: Appointed | of Ireland, Latvia, Lithuania, Poland, | Greece, Moldova, Montenegro, Republic | | August 2001 (20 years) | Slovakia, Switzerland | of North Macedonia, Romania, Serbia, | | | Senior management tenure: Appointed | Slovenia, Ukraine | Previous Group roles: Jan served as April 2019 (2 years) Senior management tenure: Appointed Deputy General Counsel for Coca-Cola May 2018 (3 years) Beverages plc from 1999 to 2001. Previous Group roles: Minas joined the Group in 1999, holding positions with Previous Group roles: Nikos joined the Previous relevant experience: Jan started increasing responsibility in the commercial Group in 2006 as Regional Manager for his career in 1993 with the law firm White function in Greece (National Account Northwest Russia and then moved to General &Case in Stockholm, Sweden. In 1995, he Manager, Athens Region Sales Manager, Manager roles in Croatia (2008), Bulgaria joined The Coca-Cola Company as Assistant National Wholesale Manager, Country Sales (2010), Hungary (2013) and Poland (2014). Division Counsel in the Nordic and Northern Director). Since 2008, Minas has held general Eurasia Division. From 1997 to 1999, Jan Previous relevant experience: Prior to management assignments in a number of was Senior Associate in White & Case’s New joining the Group, Nikos spent five years in our markets, including those of Country York office, practising securities law and M&A. technology and telecommunications and General Manager Cyprus, Country General seven years with Phillip Morris International Nationality: Swedish Manager Bulgaria and Country General in various roles and geographies across Manager Hungary. Europe and Central Asia. 7. Marcel Martin Previous relevant experience: Prior to (62) Chief Corporate Affairs and Nationality: Greek joining the Group, Minas spent seven years Sustainability Officer at Unilever Greece in managerial positions in Senior management tenure: Appointed sales and marketing including those of Brand Chief Supply Chain Officer January 2015, Manager, Trade Marketing Manager and appointed Chief Corporate Affairs & National Account Manager. Sustainability Officer January 2022 (less than 1 year) Nationality: Greek Previous Group roles: Marcel joined the Group in 1993, holding positions with increasing responsibility in the supply chain and commercial functions. Since 1995, he has held general management assignments in several of our markets, including as General Manager for Eastern Romania, Regional Manager Russia, Country General Manager Ukraine and General Manager Nigeria. He became General Manager of ourIrish operations in 2010, Supply Chain Director in 2015 and is now our Chief Corporate Affairs and Sustainability Officer. Nationality: Romanian 106 COCA-COLA HBC ### Corporate governance report continued | 10. Barbara Tönz | 12. Mourad Ajarti | Executive Leadership Team | | --- | --- | --- | | (50) Chief Customer and Commercial | (45) Chief Digital and Technology Officer | genderdiversity | | Officer | Senior management tenure: Appointed | | | Senior management tenure: Appointed | October 2019 (2 years) | | May 2021 (less than 1 year) Previous Group roles: None. Previous Group roles: Barbara joined Previous relevant experience: Mourad theGroup in 1998, building her career first holds an MSc in Computer Systems inSwitzerland as Trade Marketing Director, Networking & Tele-communications from Sales Director and Commercial Director, L’École Mohammadia d’Ingénieurs. He has andthen in Austria from 2012 as Commercial 20 years’ experience with two fast-moving Director and Interim General Manager. consumer goods industry leaders, Procter | Previous relevant experience: In 2016 | &Gamble and L’Oréal. Mourad started | | | | --- | --- | --- | --- | | Barbara enriched her experience within | withProcter & Gamble leading SAP | | | | | | Men | 10 | | theCola‑Cola System as Country Director | implementation in Morocco, Saudi Arabia | Women | 3 | | Sweden for The Coca-Cola Company, with | and Europe, and later was CIO for different | | | | responsibility expanded to Norway and | lines of business. From 2014 to 2019, Mourad | | | | Iceland in 2019 before she assumed the role | was CIO for the Asia and Pacific region for | Executive Leadership Team tenure | | | of Commercial Execution Director Europe. | L’Oréal, leading consumer and customer | | | | Prior to joining the Group in 1998, she held | journey transformation and enabling the use | | | 0-1 years 4 positions in brand and customer of big data and advanced analytics. 1-2 years 1 development at Unilever. Nationality: British and Moroccan 2-3 years 2 Nationality: Swiss 13. Spyros Mello 3-4 years 1 11. Vitaliy Novikov (47) Strategy and Transformation 5-6 years 1 | (42) Digital Commerce Business | Director | | | --- | --- | --- | | Development Director | Senior management tenure: Appointed | 6-7 years 2 | | Senior management tenure: Appointed | November 2021 (less than 1 year) | | 8-9 years 1 September 2020 (1 year) Previous Group roles: Spyros served 20-21 years 1 | Previous Group roles: Vitaliy joined the | asDeputy General Counsel and Chief | | --- | --- | | Group in 2011 as General Manager of the | Compliance Officer from 2010 to 2021. | | Baltics business unit. Since then, he has held | Hewas Deputy General Counsel from 2007 | | General Manager roles in Poland and Italy. | to 2009 and Senior Corporate Counsel from | 2005 to 2007. Previous relevant experience: Prior to | joining the Group, Vitaliy spent four years at | Previous relevant experience: Spyros | | --- | --- | | Johnson & Johnson as Managing Director of | wasan associate with the law firm of Sullivan | | the Ukrainian operation and prior to this he | & Cromwell LLP practising securities law | | spent seven years at Henkel in managerial | andM&A first in New York from 1999 to | | positions of growing responsibility in Austria | 2001 and then in London from 2001 to 2004. | and Ukraine. Nationality: Greek Nationality: Ukrainian 107INTEGRATED ANNUAL REPORT 2021 Key responsibilities of the Executive Leadership Team The key responsibilities and elements of the Executive • setting of annual targets and approval of annual business plans Leadership Team role are: which form the basis of the Group’s performance • the day-to-day executive management of the Group and its management, including a comprehensive programme of businesses, including all matters not reserved for the Board strategies and targets agreed between the Country General orother bodies; Managers and the Regional Directors; • the development of Group strategies and implementation • working closely with the Country General Managers, as set ofthe strategies approved by the Board; outin the Group’s operating framework, in order to capture • providing adequate head-office support for each of the benefits of scale, ensuring appropriate governance and Group’s countries; compliance, and managing performance of the Group; and • leading the Group’s talent and capability development programmes. Key activities and decisions in 2021 | Long‑term direction setting | | Business planning | | Business case reviews and approvals | | | --- | --- | --- | --- | --- | --- | | • Evaluating and evolving our 24/7 | | • Aligning key priorities and investment | | • Assessing strategic revenue- | | | | portfolio strategy together with our | | strategy with TCCC. | | generating initiatives and product / | | | brand partners. | • Reviewing progress of the aligned | | | packaging innovation business cases. | | • Redesigning the Company’s | | | priorities, investments and spending. | • Reviewing and approving progress | | | | organisational and reporting structure | • Reviewing and approving annual | | | ofselected key initiatives – Data, | | | to better support organisational big | | business plans for 2022 for all | | Insights &Analytics (DIA), Digital | | | bets (Project Dolphin). | | operations and central functions. | | Commerce, Digital & Technology, | | • Working on the launch and sequential | | | | | Sustainability, Diversity & Inclusion (D&I) | • Approving Group and country talent, roll-out of Costa Coffee in the and Culture. capabilities development and Group’smarkets. succession plans. • Overseeing the strategic evolution • Reviewing and updating our revenue ofSupply Chain, Human Resources, Risk, safety and business resilience growth management strategies and Commercial, Finance and BSS • Evaluating the Group’s business implementing these in our local departments. resilience strategies. commercialisation plans. • Optimisation and expansion of our • Evaluating the Group’s Risk Register • Rebooting our route-to-market logistics and manufacturing ofmajor business risks as well as approach in selected markets. infrastructure. associated risk response plans. • Assessing our sustainability priorities • Capital expenditure proposals review • Reviewing the Group’s health & safety and initiatives on the way to deliver and approval. policies and material incidents. 2025commitments. Priority projects • Reviewing the corporate audit plan • Setting long-term capability building • Costa Coffee for2022. priorities and programmes. • Customer Satisfaction • Approving and reviewing deployment • Sustainability initiatives ofmajor automation and • S4HANA digitalisationinitiatives. • Engagement • Diversity & Inclusion • Cybersecurity • Business Resilience • Venturing 2021 108 COCA-COLA HBC ### Corporate governance report continued ## Monitoring liquidity ## and emerging risks ### Dear Stakeholder ## Letter from the Chair of the The Audit and Risk Committee focused its work ## Auditand Risk Committee during2021 on enhancing and strengthening the Group’s existing financial controls, risk management and compliance systems, which the Board recognises asessential components of effective corporate governance. During 2021, the Audit and Risk Committee worked closely with the internal audit and finance teams in overseeing the implementation of the Group’s internal control framework. COVID‑19 pandemic The COVID-19 pandemic continued to impact many countries inwhich the Group operates, with measures implemented by governments to contain the spread of the virus, including closure ofnon‑essential services, travel bans, quarantines and social distancing; disrupting business activities and resulting in a significant Highlights this year economic slowdown. We received regularly a report from our senior • Risk management response to the on-going pandemic management which explained the actions being implemented to andbusiness resilience. ensure the Group remained fully operational. • Transition to SAP S4/Hana and monitoring of Cyber We have monitored and discussed our risk management processes, Security Program including our risk profile and mitigation but also principal risks and risk appetite. The COVID-19 pandemic materially changed our risk Priorities for 2022 profile, especially in light of the changing workplace. We reviewed an • monitoring the developments in accounting and regulatory elevated number of reported incidents during 2021, including those matters, including potential changes to IFRS accounting related to the ongoing impact of the pandemic. We received updates standards and respective disclosures; about the Group’s impairment assessment processes regarding • ongoing monitoring of risks as well as impairment testing goodwill and other indefinite-lived intangibles, taking into consideration ofgoodwill and intangible assets; the continuing implications of the COVID-19 pandemic. • ongoing monitoring of internal financial controls, anti-fraud The on-going COVID-19 pandemic meant that in 2021 the majority systems and Code of Business Conduct compliance; and of internal audits were delivered remotely.The Committee follows • ongoing monitoring of the Group’s enterprise risk the FRC’s Guidance on Risk Management and Internal Control and management and quality assurance, and information the Board is satisfied that the adequate control systems were in system security processes place throughout the year and up to the date of this report. • overview of the Egypt integration process and related Other areas of focus during 2021 are included in the sections about controls and risk management. the work and activities of the Audit and Risk Committee and the areas of key significance in the preparation of the Financial Statements in this report. The Audit and Risk Committee report describes in more detail the work of the Audit and Risk Committee during 2021. In performing its work, the Committee balances independent oversight with support and guidance to management. I am confident to report that the Committee supported by senior management and the external auditor consistently carried out its duties to a high standard during the reporting year. William W. (Bill) Douglas III Committee Chair 109INTEGRATED ANNUAL REPORT 2021 Role and responsibilities Members Membership status The Audit and Risk Committee monitors the effectiveness of our William W. (Bill) Douglas III (Chair) Member since 2016 financial reporting, internal control and risk management systems, Chair since 2016 and processes. The role of the Audit and Risk Committee is set out Olusola (Sola) David-Borha Member since 2015 in the charter for the committees of the Board of Directors in Annex Alexandra Papalexopoulou Member since 2020 C to the Company’s Organisational Regulations. This is available The Audit and Risk Committee comprises three independent athttps://www.coca‑colahellenic.com/en/about‑us/corporate‑ non‑Executive Directors: Bill Douglas (Chair), Olusola (Sola) governance.The key responsibilities and elements of the Audit and David‑Borha and Alexandra Papalexopoulou, who were each Risk Committee’s role are: re-elected for a one-year term by the shareholders at the Annual • providing advice to the Board on whether the Annual Report General Meeting in June 2021. including the consolidated Financial Statements, taken as a The Board remains satisfied that Bill Douglas, Sola David‑Borha and whole,is a fair, balanced and understandable assessment of the Alexandra Papalexopoulou possess recent and relevant financial and Company’s position and prospects and provides the information sector experience in compliance with the UK Corporate Governance necessary for shareholders to assess the Group’s position and Code. Bill Douglas was formerly Executive Vice President and performance, including whether there is consistency throughout ChiefFinancial Officer of Coca‑Cola Enterprises, Sola David‑Borha the report including the financial reporting, whether the report will hasheld a number of senior financial positions and Alexandra form a good basis of information for the shareholders, and that Papalexopoulou has served as a treasurer. The Board is also satisfied important messages are highlighted appropriately throughout that the members of the Committee as a whole have competence in thereport; the sector in which the Company operates in compliance with the UK • monitoring the quality, fairness and integrity of the consolidated Corporate Governance Code and UK listing regime requirements. Financial Statements of the Group, and reviewing significant financial reporting issues and judgements contained in them; Further details on their experience are set out in their respective • reviewing the Group’s internal financial control and anti-fraud biographies on pages 88 to 90. systems as well as the Group’s broader enterprise risk management The Group Chief Financial Officer, as well as the General Counsel, and legal and ethical compliance programmes (including external auditor, the Head of Corporate Audit, and the Group computerised information system controls and security) with the Financial Controller, normally attend all meetings of the Audit and input of the external auditor and the internal audit department; Risk Committee. Other officers and employees are invited to attend • reviewing and evaluating the Group’s major areas of financial risk meetings when appropriate. The Head of Corporate Audit, and, and the steps taken to monitor and control such risk, as well as separately, the external auditor, meet regularly with the Audit and guidelines and policies governing risk assessment; and Risk Committee without the presence of management to discuss • monitoring and reviewing the external auditor’s independence, the adequacy of internal controls over financial reporting and any quality, adequacy and effectiveness, taking into consideration the other matters deemed relevant to the Audit and Risk Committee. requirements of all applicable laws in Switzerland and the UK, the The Chair of the Audit and Risk Committee attended our AGM listing requirements of the London Stock Exchange and Athens inJune 2021 and regularly interacts with representatives of Stock Exchange, and applicable professional standards. ourshareholders. 110 COCA-COLA HSC # Corporate governance report continued # Work and activities The Audit and Risk Committee met eight times, altho video conference call, during 2021 and discharged the responsibilities defined under Annex C of the Organisational Regulations. The work of the Audit and Risk Committee during the accounting year included evaluation of and review of the respective matters, as well as assessment of management's mitigating actions and response plans, in the areas below: - the Integrated Annual Report including the consolidated Financial Statements and the full-year results announcement for the year ended 31 December 2020 prior to their submission to the Board for approval, and compliance with Group policies; - the interim consolidated Financial Statements and interim results announcement for the six-month period ended 2 July 2021, prior to their submission to the Board for approval; - the trading updates for the three-month period ended 2 April 2021 and the nine-month period ended 1 October 2021; - areas of significance in the preparation of the consolidated Financial Statements; - the internal control environment, principal risks and risk management systems (including the nature and extent of the principal risks resulting from the COVID-19 pandemic), and the Group's statement on the effectiveness of its internal controls prior to endorsement by the Board, concluding that management has carried out a robust risk assessment process; - the Viability Statement scenarios and underlying assumptions and recommendations to the Board that the Viability Statement be approved, including discussion of management's conclusions with respect to Going Concern and the Viability Statement; - the external auditor's report on the Group's IFRS earnings release for the financial year ended 31 December 2020, including assessment of the auditor's enhanced audit report and key audit matters and conclusion that there was nothing that warranted the attention of the Board; and review of external auditor's report on the Group's interim report for the six-month period ended 2 July 2021; - report on tax audits undertaken during 2021 in a number of territories; - quarterly reports on internal audit matters across the Group's business regions, concluding that no material failings were identified; - consideration and discussion of the guidance to FRC's Practice Aid on audit quality; - direct procurement matters and initiatives for 2021, including contingency plans for COVID-19 as well as commodity exposure for 2021; - regular reports on health and safety, GDPR compliance, transition to SAP S4/Plans, cybersecurity, business continuity, security, quality assurance, environmental protection, asset protection, treasury and financial risks, anti-bribery and fraud control, insurance (including placing strategy), enterprise risk management processes and internal control framework (including any adjustments to the 2021 schedule and updates to the controls as a result of the COVID-19 pandemic and the new environment); - project for the optimisation of the Internal Control Framework Risk Matrix and updates on progress and timing; - reports on litigation and regulatory investigations; - matters arising under the Group's Code of Business Conduct and the actions taken to address any identified issues; - an internal quality assessment of the internal audit function, in accordance with the Institute of Internal Auditors Attribute Standards 1311; - impact of the COVID-19 pandemic on trading and revenue and regular updates on developments, potential risks and mitigating actions, including updates on the Group's response to the COVID-19 pandemic in the Group's territories; - an assessment of the skills of the internal auditors and the sufficiency of the internal audit budget, confirming of the Internal Auditor's quality, experience and expertise for the business. The Audit & Risk Committee is satisfied that internal audit has the appropriate resources for the business; - updates on risk management and business resilience, including the Group's response to the COVID-19 pandemic, the activation and development of Business Continuity strategies and the streamlining of the Group's risk management processes. Review of a description of the top 10 risks per region and the Group's updated Strategic Risk Summary; - reports on the Group's impairment assessment processes in connection with goodwill and other indefinite-lived intangible assets for the interim financial report; - regular updates from the external auditor on accounting and regulatory developments. Also, an update on Swiss regulatory developments; - tax issues including: - an update on increasing substance, coherence and transparency requirements and the compliance measures that the Group was taking, including an overview of the Group's tax governance and risk management framework, an upgrade of its tax capabilities, a Group-wide approach to tax controversy; and the continued simplification of the Group's legal structure; - reviewing the OECD new tax framework in the digital era - report on the introduction, and potential impact, of digital services taxes by several countries in the Group's territories; and - reviewing a bench-marking study by PwC ranking the Group high compared to industry peers on its efforts to establish tax transparency; - approval of chart of authority and delegation for operational activities; - external audit plan and pre-approval of audit fees for 2022 - consideration of the external auditor's independence, quality, adequacy and effectiveness of its audit of the financial statements; and - assessed the Company's external reporting to ensure it is fair, balanced and understandable as a result of the Board's obligation under the Corporate Governance Code. The Committee was responsible for the review of the 2021 Integrated Annual Report including the Consolidated Financial Statements and associated reports and information. The Committee received assurances from management and details on the processes underlying the preparation of published financial information. Following evaluation of all available information, including consideration of the uncertainties around the COVID-19 pandemic, the Committee concluded and advised the Board that the 2021 Integrated Annual Report including the Consolidated Financial Statements is fair, balanced and understandable. Finally, the Board receives and reviews a report from the Audit and Risk Committee on its activities and discussions at the Board meeting following each Audit and Risk Committee meeting. INTEGRATED ANNUAL REPORT 2021 111 ### Areas of key significance in the preparation of the Financial Statements The Audit and Risk Committee considered a number of areas of key significance in the preparation of the Financial Statements in 2021, including the following: - • appropriateness of critical accounting judgements and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities in the consolidated Financial Statements, including income taxes (detailed in Notes 5, 10, 13, 15, 21 and 29 to the consolidated Financial Statements), identified by management; - • review of the trading environment and resilience of the Group's business in light of the COVID-19 pandemic and strategic actions implemented to mitigate risks; - • review of impairment testing performed by management and reviewed by the external auditor under IAS 36 as well as the related sensitivity analysis with confirmation that management had undertaken a robust impairment testing process, relying on both internal information, and other publicly available metrics to perform their assessment; review key assumptions for specific countries, challenging management drivers of relevant deviations and performance to date, as well as countries WACC rates development vs prior year - • review of the contingencies, legal proceedings, competition law and regulatory procedures, including cases involving the national competition authorities of Greece and litigation matters in Nigeria and Greece, and the impact of these on the consolidated Financial Statements and accompanying notes; - • review of management's report that considered the potential impact of the COVID-19 pandemic on revenues and carrying amounts of assets; - • assessment of management's judgement on relevant areas for additional disclosures, to address IAS 34 requirement for explanation of significant events, in light of the ongoing COVID-19 pandemic; - • review of accounting standard IAS 34 that required an explanation of significant events implying that additional disclosure should be made to reflect the financial impact of the COVID-19 pandemic and mitigating measures; - • discussion of the following accounting pronouncements, taking effect on 1 January 2021: IFRS 9, IAS 39, IFRS 7 and IFRS 16 (Interest Rate Benchmark Reform-Phase 2), and IFRS 16 (Covid-19 related rent concessions); - • review of guidance provided from the UK Financial Conduct Authority and Financial Reporting Council related to areas of focus for the 2021/2022 financial reporting, climate change, and viability and going concerns and corporate governance matters; - • review of interim judgements performed by management and in alignment with the external auditor, regarding the impairment of indefinite-lived intangibles in light of the on-going Covid-19 pandemic; - • consideration of quality and safety incidents in Nigeria and Bulgaria; - • assessed management's work in conducting a robust assessment of the risks that impact the Viability and Going Concern Statements, including review of scenarios and underlying assumptions; - • recommended to the Board to approve the Viability Statement; and - • deemed appropriate that the Group continues to apply the going concern basis for the preparation of the financial statements. ### External auditor PricewaterhouseCoopers AG, Birchstrasse 160, CH 8050 Zurich, Switzerland (PwC AG) has been elected by the shareholders as the statutory auditor for the Group's statutory consolidated and standalone Financial Statements. The signing partner for the statutory Financial Statements on behalf of PwC AG is Sandra Boehm Uglow, who has held this role for the first time with regards to the year ended 31 December 2021. The Board, at the recommendation of the Audit and Risk Committee, has retained PricewaterhouseCoopers S.A., 268 Kifissias Avenue – 15232 Halandi (Greece) (PwC S.A.), an affiliate of PwC AG, to act as the Group's independent registered public accounting firm for the purposes of reporting under the UK rules for the year ended 31 December 2021. The signing partner for the Financial Statements on behalf of PwC S.A. is Fotis Smyrnis, who has held this role for the first time with regards to the year ended 31 December 2021. The appointment of PwC has been approved by the shareholders until the next Annual General Meeting by way of advisory vote. PwC refers to PwC AG or PwC S.A., as applicable, in this Annual Report. During the accounting period, the members of the Audit and Risk Committee met on a regular basis with the newly appointed PwC signing partners, both with and without management being present. This provided the Audit and Risk Committee with an opportunity for open dialogue, to question and be satisfied as to the quality of the audit work performed by PwC and challenge PwC's professional skepticism. During the meetings, the newly appointed PwC signing partners demonstrated their understanding of the group's business risks and the consequential impact on the financial statement risks, especially around areas of key significance in the preparation of the Financial Statements including but not limited to the annual impairment testing, contingencies and legal proceedings including taxes. The Audit and Risk Committee took an active role in reviewing the scope of the audit, the independence, objectivity and effectiveness of PwC, and the negotiations relating to audit fees. The Audit and Risk Committee also met with the management team, which led the discussions with PwC, including the Head of Corporate Audit, to review the performance of PwC without PwC being present. Following this review process, the Audit and Risk Committee has recommended to the Board that a proposal to reappoint PwC be put to a shareholders' vote at the next Annual General Meeting. PwC has acted as the Group's sole external auditor since 2003. The Company ran a competitive tender for the external auditor services in 2015 which was overseen by the Audit and Risk Committee. Following the evaluation of the proposals, the Audit and Risk Committee concluded in 2015 that the best interests of the Group and its shareholders would be served by retaining PwC as external auditor and made such recommendation to the Board. PwC was reappointed by the Board as the Group's external auditor with effect from 11 December 2015. Currently, the Audit and Risk Committee anticipates that the audit contract will be put out to tender again in 2025. There are no contractual or other obligations restricting the Group's choice of external auditor. ### Non-audit services provided by the external auditor The Audit and Risk Committee considers the independence, in both fact and appearance, of the external auditor as critical and has long had an auditor independence policy providing definitions of the services that the external auditor may and may not provide. In line with the relevant FRC Guidance, the policy requires the Audit and Risk Committee's pre-approval of all audit and permissible non-audit services provided by the external auditor, and only for matters that are clearly trivial to the Company. Such services include audit, work directly related to audit, and certain tax and other services as further explained below. In practice, the Audit and Risk Committee applies the policy restrictively, and approval for work other than audit and audit-related services is rarely granted. 112 COCA-COLA-HIC ## Corporate governance report *continued* Under the policy, pre-approval may be provided for work associated with: statutory or other financial audit work under IFRS or according to local statutory requirements; attestation services not required by statute or regulation; accounting and financial reporting consultation and research work necessary to comply with generally accepted accounting and auditing standards; internal control reviews and assistance with internal control reporting requirements; review of information systems security and controls; tax compliance and related tax services, excluding any tax services prohibited by regulatory or other oversight authorities; expatriates; and other individual tax services; and assistance and consultation on questions raised by regulatory agencies. For each proposed service, the external auditor is required to provide detailed back-up documentation at the time of approval to permit the Audit and Risk Committee to make a determination whether the provision of such services would impair the external auditor's independence. PwC has complied with the policy for the financial year ended on 31 December 2021. The policy was updated on 1 January 2021 to refer to the FRC's Revised Ethical Standard 2019, however no significant changes were performed. ### Audit fees and all other fees #### Audit fees The total fees for audit services paid to PwC and affiliates were approximately €4.8 million for the year ended 31 December 2021, compared to approximately €4.5 million for the year ended 31 December 2020. The total fees for 2021 include fees associated with the annual audit and review of the Group's half-year reports, prepared in accordance with IFRS and local statutory audits. #### Audit-related fees Fees for audit-related services paid to PwC and affiliates for the year ended 31 December 2021 were €0.7 million, compared to €0.6 million for the year ended 31 December 2020. #### Tax-related fees No fees were paid to PwC and affiliates for tax services for the year ended 31 December 2021 or for the year ended 31 December 2020. #### All other fees No fees were paid to PwC or affiliates for non-audit services for the year ended 31 December 2021 or for the year ended 31 December 2020. #### Risk management During 2021, the Company continued to revise and strengthen its approach to risk management as described in detail on pages 58-71. The primary aim of this framework is to minimise our exposure and ensure that the nature and significance of all risks we are facing are properly identified, reviewed, managed and, where necessary, escalated. Risk assessments are conducted and discussed at monthly Senior Leadership Team meetings in all our business units. These assessments are reviewed by regional management teams and the Chief Risk Officer twice a year. In addition, corporate functions conduct broader risk assessments across the business with the Chief Risk Officer biannually. The Company's Group Risk and Compliance Committee reviews the emerging as well as the identified risks biannually and the emerging and material risks as well as mitigating actions is presented by the Chief Risk Officer to Executive Leadership Team and the Audit and Risk Committee. This process is both top-down and bottom-up and is designed to ensure that risks arising from business activities are appropriately managed. The Audit and Risk Committee confirms that the risk management and internal control systems have been in place for the year under review and up to the approval of the annual report and accounts. Finally, we have in place third-party insurance to cover residual insurable risk exposure such as property damage, business interruption and liability protection, including Directors' and officers' insurance for our Directors and officers, as well as for the officers and directors of certain subsidiaries. #### Internal control The Board has ultimate responsibility for ensuring that the Company has adequate systems of financial reporting control. Systems of financial reporting control can provide only reasonable and not absolute assurance against material misstatements or loss. In certain of the countries in which we operate, our businesses are exposed to a heightened risk of loss due to fraud and criminal activity. We review our systems of financial control regularly in order to minimise such losses. #### Internal audit Our internal audit function reports directly to the Audit and Risk Committee, which reviews and approves the internal audit plan for each year. The internal audit function consists of approximately 40 full-time professional audit staff mainly based in Athens, Sofia, Moscow and Lagos, covering a range of disciplines and business expertise. One of the responsibilities of the internal audit function is to provide risk-based and objective assurance to the Board as to whether the Group's framework of risk management, including internal control framework, is operating effectively. For this purpose, the Head of Corporate Audit makes quarterly presentations to the Audit and Risk Committee and meets regularly with the Audit and Risk Committee without the presence of our management. In addition, the internal audit function reviews the internal financial, operational and compliance control systems across all the jurisdictions in which we operate and reports its findings to management and the Audit and Risk Committee on a regular basis. The internal audit function focuses its work on the areas of greatest risk to us, as determined by a risk-based approach to audit planning. As part of our commitment to maintaining and strengthening best practice in corporate governance matters, we also consistently seek to enhance our internal control environment and risk management capability. The internal audit function carries out work across the Group, providing independent assurance, advice and insight to help the organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluating and improving the effectiveness of risk management, control and governance processes. In December 2021, the Audit and Risk Committee agreed the FY22 audit plan to be undertaken by the internal audit team. The audit plan coverage is based on risk, strategic priorities and consideration of the strength of the control environment. The internal audit function prepares audit reports and recommendations following each audit, and appropriate measures are then taken to ensure that all recommendations are implemented. Significant issues, if any, are raised at once. There were no such issues in 2021. The Board has adopted a chart of authority, defining financial and other authorisation limits and setting procedures for approving capital and investment expenditure. The Board also approves detailed annual budgets. It subsequently reviews quarterly performance against targets set forth in these plans and budgets. A key focus of the financial management strategy is the protection of our earnings stream and management of our cash flow. We have conducted an annual review of the effectiveness of our risk management system and internal control systems in accordance with the UK Corporate Governance Code. Part of this review involves regular review of our financial, operational and compliance controls, following which we report back to the Board on our work and findings as described above. This allowed us to provide positive assurance to the Board to assist it in making the statements that our risk management and internal control systems are effective, as required by the UK Corporate Governance Code. Further information is set out on pages 54-61. ![img-25.jpeg](img-25.jpeg) INTEGRATED ANNUAL REPORT 2021 113 The key features of the Group's internal control systems that ensure the accuracy and reliability of financial reporting include: clearly defined lines of accountability and delegation of authority; policies and procedures that cover financial planning and reporting; preparation of monthly management accounts; and review of the disclosures within the Annual Report from function heads to ensure that the disclosures made appropriately reflect the developments within the Group in the year and meet the requirement of being fair, balanced and understandable. The Audit and Risk Committee reviews the results of the internal audit reports during each meeting, focusing on the key observations of any reports where processes and controls require improvement. The Audit and Risk Committee was also provided with updates on the remediation status of management actions of internal audit findings and on the internal audit quality assurance and improvement programme at each meeting. A particular focus during 2021 was the robustness of the internal control systems and processes around risk management, in light of the on-going COVID-19 pandemic. The Audit and Risk Committee was kept informed of any changes or adaptations to ensure full functionality as the Company continued to operate under the circumstances and uncertainties of the COVID-19 pandemic. The Group Chief Financial Officer and the Regional Finance Directors, Country General Managers and Country Chief Financial Officers have access to the implementation status of the recommendations at all times. Where internal or external circumstances give rise to an increased level of risk, the audit plan is modified accordingly. Nevertheless, no significant cases occurred this year. Any changes to the agreed audit plan are presented to and agreed by the Audit and Risk Committee. Detailed updates on specific areas were provided at the request of the Audit and Risk Committee, such as, for example, the progress on audit issues relating to a Health and Safety audit and to an Information Technology including Cyber Security audit. #### Whistleblowing measures ##### Business ethics and anti-corruption We seek to grow our business by serving customers and consumers, and conduct all business activities with integrity and respect. The Board is responsible for ensuring appropriate procedures and processes are in place to enable our workforce to raise any issues of concern and is satisfied that the processes in place are appropriate. The Board maintains zero-tolerance regarding breaches of our Code of Business Conduct and anti-bribery policies, as well as any attempts to retaliate against our people who report potential violations. We have mandatory training for all our people, including our ELT, so that everyone understands our Code of Business Conduct, and we hold additional targeted anti-bribery training for employees working in areas we assess as high risk. In April 2021, a new consolidated e-learning program on our Code of Business Conduct and Anti-Bribery Policy was introduced. The course is available on-line to all employees and includes a knowledge test, acknowledgement and re-commitment to compliance with the Code and its related policies. As in the past, this training will be a regular requirement for all employees. At the end of the training we over 26,300 employees, which was 97.7% of total employees, had completed the course. Since then, we continue to train every newly hired employee. In 2021 our communication plan on compliance included several initiatives to continue raising awareness on business ethics among our people, like our annual Ethics and Compliance Week that was rolled out across our Business Units. We have also an established anti-bribery due diligence process for third parties who have contact with public authorities on behalf of our Company. For further information please see the Anti-Bribery Policy and Code of Business Conduct on our website: https://www.coca-colahellenic.com/en/about-us/corporate-governance/policies. We have established grievance mechanisms, including an independently operated whistleblower 'Speak Up Hotline', available in all Coca-Cola HBC countries in local languages to ensure any concerns can be raised. In 2021, we investigated 344 allegations (2020: 322) of which 210 (2020: 139) were received through the 'Speak Up Hotline'. All allegations involving potential Code of Business Conduct violations were investigated in accordance with the Group Code of Business Conduct Handling Guidelines. Of those investigated, 105 (2020: 105) matters were substantiated as code violations of which 15 (2020: 26) involved an employee in a managerial position or involved a loss greater than €10,000. For details concerning the handling of allegations received in 2021, see our website. You can find more on allegations investigated and violations uncovered in our GRI index: https://www.coca-colahellenic.com/content/dam/coh/us/documents/our/Coca-Cola-HBC-2021-GRIContent-Index.pdf.downloadasset.pdf. Through the 'Speak Up Hotline' we receive, retain, investigate and act on employee complaints or concerns regarding accounting, internal control or ethical matters. This includes any matters regarding the circumvention or attempted circumvention of internal controls, including matters that would constitute a violation of our Code of Business Conduct or matters involving fraudulent behaviour by officers or employees of the Group. All such allegations, complaints or concerns may be communicated in a variety of ways, in local languages and on an anonymous basis, to our Head of Corporate Audit. Communications received by the Head of Corporate Audit, or directly through the 'Speak Up Hotline', are kept confidential and, where requested, anonymous. The Head of Corporate Audit liaises regularly with the General Counsel and communicates all significant allegations to the Chair of the Audit and Risk Committee. All matters received via the 'Speak Up Hotline' or any other reporting mechanism are thoroughly investigated. The Audit and Risk Committee receives summary reports of escalated incidents and instances of whistleblowing together with the status of investigations and, where appropriate, management actions to remedy issues identified. The Committee reports to the Board on such matters, which reviews and considers those reports as appropriate. ##### Disclosure Committee A Disclosure Committee has been established, and disclosure controls and procedures have been adopted to ensure the accuracy and completeness of our public disclosures. The Disclosure Committee is composed of the Group Chief Financial Officer, the General Counsel, the Director of Investor Relations and the Group Financial Controller. ##### Performance reporting Reports on our annual performance and prospects are presented in the Annual Report following recommendation by the Audit and Risk Committee. In line with UK practice, we have adopted half-year and full-year reports, and Q1 and Q3 trading updates. Internally, our financial results and key performance indicators are reviewed by the Executive Leadership Team on a monthly basis. This information includes comparisons against business plans, forecasts and prior-year performance. The Board of Directors receives updates on performance at each Board meeting, as well as a monthly report on our business and financial performance. ![img-26.jpeg](img-26.jpeg) 114 COCA-COLA HBC ### Corporate governance report continued ## Ensuring business ## continuity and growth ### Dear Stakeholder ## Letter from the Chair of the The work of the Nomination Committee has continued ## Nomination Committee to focus on the composition of the Board and the important task of Board and senior management succession planning. In 2021, the Committee continued to review the balance of skills, experience and diversity of the Board and focused on the talent development, employee engagement and gender diversity initiatives necessary to ensure that the Group has the people and skills to deliver on its strategy. To this end the Committee oversaw the appointment process for Henrique Braun and Bruno Pietracci as non‑Executive Directors in light of the retirement of José Octavio Reyes and Alfredo Rivera. The Committee also considers the overall length of service of the Board as a whole as part of its succession planning and keeps under review the need to refresh Board membership. In addition, the Committee oversaw an externally facilitated self-assessment process. Highlights this year A summary of the Group’s Nomination Policy for the recruitment of • The successful onboarding of non-Executive Directors, Board members is available online at: https://www.coca‑colahellenic. Henrique Braun and Bruno Pietracci. com/content/dam/cch/us/documents/about-us/corporate- governance/summary-of-nomination-policy-for-recruitment-of- Priorities for 2022 board‑members.pdf.downloadasset.pdf. The Board Diversity Policy • continuous work on succession plans for Board and senior is described on page 115. management positions; • close monitoring of the Group’s talent and development frameworks in order to ensure the continued strength ofthe current talent pipeline; Reto Francioni • externally facilitated Board and committee assessments; and Committee Chair • follow up actions on outcome of 2021 evaluation assessment. Role and responsibilities • ensuring, together with the Chairman, the operation of a The function of the Nomination Committee is to establish and satisfactory induction programme for new members of the Board maintain a process for appointing new Board members, to manage, and a satisfactory ongoing training and education programme for in consultation with the Chairman, the succession of the Chief existing members of the Board and its committees as necessary Executive Officer and to support the Board in fulfilling its duty to deliver on our strategy; toconduct a Board self‑assessment. The formal role of the • setting the criteria for, and overseeing, the annual assessment Nomination Committee is set out in the charter for the committees ofthe performance and effectiveness of each member of the of the Board of Directors in Annex C of the Company’s Board and each Board committee; Organisational Regulations. This is available online at https:// • conducting an annual assessment of the performance and coca-colahellenic.com/en/about-us/corporate-governance/ effectiveness of the Board, and reporting conclusions and corporate-governance-overview/. recommendations based on the assessment to the Board; and Key elements of the Nomination Committee’s role are: • overseeing the employee and management talent development and succession plans of the Group. • reviewing the size and composition of the Board; Members Membership status • identifying candidates and nominating new members to the Board; Reto Francioni (Chair) Member since 2016 • planning and managing, in consultation with the Chairman, a Board Chairsince 2016 membership succession plan; Charlotte J. Boyle Member since 2017 Anna Diamantopoulou Member since 2020 Committee at work Succession Board Recruitment Shortlisting planning composition INTEGRATED ANNUAL REPORT 2021 115 The members of the Nomination Committee are Reto Francioni, Charlotte Boyle and Anna Diamantopoulou. All members of the Nomination Committee are independent non-Executive Directors. At the Annual General Meeting in June 2021, Reto Francioni, Charlotte Boyle and Anna Diamantopoulou were re-elected for a one-year term by the shareholders. ## Work and activities The Nomination Committee met four times during 2021 and discharged the responsibilities defined under Annex C of the Company's Organisational Regulations. The Chief Executive Officer and the Group Human Resources Director regularly attend meetings of the Nomination Committee. In addition, the Chairman is actively involved in the work of the Nomination Committee concerning succession planning and the selection of key people. In 2021, the General Counsel also met with the Nomination Committee on several occasions. During 2021, the work of the Nomination Committee included consideration of: - succession planning and development of plans for the recruitment of new Board members and senior management, including two non-Executive Directors (given that they were appointed at the request of The Coca-Cola Company, an external consultancy was not engaged in connection with these appointments, but is generally used for non-Executive Director appointments) and certain members of the Group's Executive Leadership Team; - composition of the Board, including the appropriate balance of skills, knowledge, experience and diversity; - review of the talent management framework; - the performance evaluation and annual assessments of the committees and the Board; - follow up actions arising from Board and committee evaluations; - review of the Director induction process and training programmes; and - review of the Group's Inclusion and Diversity Policy. ## Performance evaluation of the Board The Nomination Committee led the annual assessment of the performance of the Board and its committees during the year with the support of Lintstock, an external advisory firm. The key areas included in the assessment were Board structure and diversity, timeliness and quality of information, Board discussions, and effective contributions of each Director, the performance of the Board, committees, succession planning, risk appetite and risk management, and remuneration and performance. The scores were high overall, and the results of the evaluation were presented at the December 2021 Board meeting. Further details on the internal Board evaluation are set out on page 103. As with all employees, the Group offers training opportunities to the Board and senior management in order to improve their skills, and encourages all Board members and senior management to gain relevant experience and knowledge to fulfil their position's duties. ## Diversity The Group continues to have a firm commitment to policies promoting diversity, equal opportunity and talent development at every level throughout the organisation, including at Board and management level, and is constantly seeking to attract and recruit highly qualified candidates for all positions in its business. The Group's Diversity and Inclusion Policy applies to all people who work for us. Further details on the Group's Diversity and Inclusion Policy are set out on page 41 in the Strategic Report. The Group believes that diversity at the Board level acts as a key driver of Board effectiveness, helps to ensure that the Group can achieve its overall business goals especially in light of our geographical footprint, and is critical in promoting a diverse and inclusive culture across the whole Group. The Board has adopted a formal Board Diversity Policy, which guides the Nomination Committee and the Board in relation to their approach to diversity in respect of succession planning and the selection process for the appointment of new Board members. The Nomination Committee is responsible for implementing this policy and for monitoring progress towards the achievement of its objectives. The requirements and objectives of the Board Diversity Policy include that the Nomination Committee is required to take into account all aspects of diversity, including age, ethnicity, gender, educational and professional background and social background when considering succession planning and new Board appointments; seek a wide pool of candidates, with a broad range of previous experience, skills and knowledge; and give preference to executive search firms that are accredited under the Enhanced Code of Conduct for Executive Search Firms. Board appointments are evaluated on merit against objective criteria with due regard for diversity to ensure that candidates contribute to the balance of skills, experience, knowledge and diversity of the Board. The Board also considers the overall length of service of the Board as a whole when considering refreshment of the membership. The Board understands the benefits of diversity of gender, ethnicity, knowledge and experience, and this is reflected in the Board Diversity Policy. The objectives of the Board Diversity Policy include ensuring female representation on the Board and as such both the Board and Nomination Committee are mindful of the target set for FTSE 100 companies by the Hampton-Alexander Review (minimum of 33% of women on the Board and 33% of women on the executive committee and direct reports by the end of 2020). They are also mindful of the target set out in the Parker Review to increase ethnic diversity (at least 'one person of colour' on the Board by 2021). The Board currently has 30% female representation and also meets the target set by the Parker Review having had a person of colour on the Board since 2015. The Board is committed to improving the Board gender balance and the Nomination Committee has, and will continue to, consider this in the context of its continuous work on succession plans for the Board, as well as senior management. The Executive Leadership Team has 23% female representation while 30% of our senior leaders are women. Figures showing Board and senior management gender diversity are shown on pages 90 and 105. The Board is committed to appointing the best people with the right skill set, regardless of gender, ethnicity, religion or disability, and as such does not think it is appropriate to set specific targets for Board appointments. The Board recognises the importance of diversity in its business. It is the Board's responsibility to oversee senior management succession planning for a diverse pipeline of managers and talent, identified from the management talent development programme. This links to our strategy to develop our people and ensure we attract and retain a diverse talent pool, and is one of the five pillars of our growth strategy. Further information on pages 38-43. The Nomination Committee, in conjunction with the Executive Leadership Team, will continue to monitor the proportion of women at all levels of the Group and ensure that all appointments are made with a view to having a high level of diversity within the workplace and in leadership positions. Interview Balance of skills assessment Appointment Induction 116 COCA-COLA MBC Corporate governance report continued # Overseeing the journey to net zero ## Letter from the Chair of the Social Responsibility Committee ![img-27.jpeg](img-27.jpeg) ### Activity highlights 2021 - close governance of licence to operate pillar as part of our Growth Story 2025 including progress of public Mission 2025 commitments; - endorsement and a detailed review of the actions, initiatives, and communication plans supporting NetZeroBy40, the Company's commitment to reach net zero greenhouse gas emissions by 2040, combined with science-based carbon reduction targets by 2030; - review of sustainable packaging agenda, progress, and action plan; - deep-dive analysis of Company results in various environmental, social and governance (ESG) benchmarks and ratings; - review of the new Sustainability department structure; - adoption of new food loss policy and biodiversity statement; - update of the packaging waste policy; - ongoing updates on plastic packaging levies and product tax developments; and - active involvement in annual Stakeholder Forum on 'Winning ESG Partnerships – When One Plus One Exceeds Two', including preparations and measurement/feedback. ### Priorities for 2022 - Progress of public Mission 2025 commitments with a focus on NetZeroBy40 and packaging initiatives; - partnerships for innovation in the area of ESG; - implementation of 2022 roadmap related to 2030 science-based carbon reduction targets to reduce carbon emissions across the value chain; - plans for added sugar reduction across beverage categories aligned with the UNESDA commitment to sugar reduction; - stakeholder outreach activities; - reviewing and streamlining of Company disclosure and reporting standards based on GRI, IRC, TCFD and SASB frameworks, and the EU Taxonomy; and - ongoing activities related to ESG benchmarking activities, plastic packaging levies and product tax developments. ### Dear Stakeholder The Social Responsibility Committee continued its focus on the overall integration of sustainability in the business strategy and the Group's progress towards its Mission 2025 sustainability targets. To support the achievement of our very ambitious NetZeroBy40 emissions reduction goal, we oversaw implementation of a new structure and new ways of working in the Group's Sustainability department. The key changes are: (1) a much extended and upgraded Head of Sustainability role in the Group team; (2) creating a cross-functional Sustainable Packaging team that will focus on developing an end-to-end approach; (3) a new governance model and supporting activities; (4) prioritisation of sustainability as the core theme for communication. The Committee monitored sustainability-related regulatory developments, including the EU Green Deal and other regulations promoting a circular economy, single-use plastics and packaging waste, deposit return systems and evolving nutrition labelling requirements. During 2021, the Company retained top scores in MSCI ESG ratings, CDP Climate and Water, ISS ESG, Video Eiris and FTSE4Good. The Committee is particularly proud that the Company was again rated as Europe's most sustainable beverage business in the S&P Corporate Sustainability Assessment (DJSI). 117INTEGRATED ANNUAL REPORT 2021 Going forward in 2022, the Committee will ensure that sustainability Work and activities is fully integrated into the business strategy and that the company The Social Responsibility Committee met four times during 2021. continues to create value for all of its stakeholders. Areas of specific Along with Committee members, those meetings were attended attention will include focus on increasing diversity, inclusion and byother members of the Board, i.e., Charlotte J. Boyle and Ryan equity; sustainable sourcing; the relevance of biodiversity and Rudolph, the CEO, the Chief Corporate Affairs & Sustainability deforestation for the business. Officer, and additional senior leaders subject to the discussion topics. The Chairman of the Board also attended some of the meetings. During 2021, the Social Responsibility Committee reviewed and provided guidance and insights to advance the Group’s sustainability approach in the following areas: Anastasios I. Leventis • progress and the action plans made against the 17 publicly Committee Chair communicated 2025 sustainability commitments; • new Group Sustainability structure and introduction of Sustainable Packaging cross-functional team to manage agenda and track Role and responsibilities progress of accelerating a shift towards more sustainable packaging The Social Responsibility Committee is responsible for the (rPET, packageless, refillables, and other) and packaging recovery; development and supervision of procedures and systems to ensure the pursuit of the Company’s social and environmental goals, as set • detailed plans and initiatives for delivery of science-based carbon | out in the charter for the committees of the Board of Directors in | | reduction targets and NetZeroby40 commitment; | | | | --- | --- | --- | --- | --- | | Annex C to the Company’s Organisational Regulations. This is | • innovative opportunities related to CO | | | 2 capture from the air | | available at https://www.coca‑colahellenic.com/en/about‑us/ | | (CO | 2 removal) and digital applications for incentivising consumers | | | corporategovernance: | | for bottling recycling; | | | • low-sugar and zero-sugar products and reformulations as part Key areas of responsibility are: ofthe Group’s commitment to reduce calories and added sugar; • establishing the principles governing the Group’s policies on social • volunteering activities across our BUs; responsibility, and the environment to guide management’s • diversity, equity, and inclusion topics; decisions and actions; • health and safety protocols to ensure the safety of all • overseeing the development and supervision of procedures and ouremployees; systems to ensure the achievement of the Group’s social • support to our communities throughout the COVID‑19 pandemic; responsibility and environmental goals; • #YouthEmpowered digital programmes and curriculum; • establishing and operating a council responsible for developing and implementing policies and strategies to achieve the • established partnerships in the area of packaging, blockchain, Company’s social responsibility and environmental goals (in all packaging recycling and carbon; ESG pillars, such as climate change, water stewardship, packaging • materiality process and review of outcomes of the annual and waste, sustainable sourcing, health and nutrition, and our materiality survey; people and community), and ensuring Group-wide capabilities • opportunities for EU funds related to different environmental toexecute such policies and strategies; initiatives, mostly for renewable energy, carbon reduction • ensuring the necessary and appropriate transparency and andpackaging optimisations; openness in the Group’s business conduct in pursuit of its social • stakeholder engagement plan and outcomes of the Annual responsibility and environmental goals; Stakeholder Forum; and • ensuring and overseeing the Group’s interactions with • use of relevant reporting frameworks including the Global stakeholders in relation to its social responsibility and Reporting Initiative (GRI) Standards, Task Force on Climate- environmental policies, goals, and achievements, including the related Financial Disclosures (TCFD) and the Sustainability level of compliance with internationally accepted standards; and Accounting Standards Board (SASB). • reviewing Group policies on environmental issues, human rights, and other topics as they relate to social responsibility. Members Membership status Anastasios I. Leventis (Chair) Member since 2016 Chairsince 2016 Anna Diamantopoulou Member since June 2020 Bruno Pietracci Member since June 2021 118 COCA-COLA HBC ### Directors’ remuneration report ## Maintaining our performance ## focus during a challenging year As the Chair of the Remuneration Committee, I am pleased to ## Letter from the Chair of the present our Directors’ Remuneration Report for the year ended 31December 2021. Our primary listing is on the London Stock ## Remuneration Committee Exchange, and our Company is domiciled in Switzerland. We therefore ensure, as described in this report, that we comply with UK regulations, except where these conflict with Swiss law. The format of this year’s Remuneration Report is consistent with the format of last year’s as there were no significant changes in relevant regulations. As always, Iwelcome your feedback and suggestions regarding anything we can do to improve the report further. The Group’s remuneration philosophy and policies are designed to attract, motivate and retain the talented people we need to meet theCompany’s strategic objectives, and to give them due recognition. To this end, the Remuneration Committee has worked to ensure that the remuneration policy of the Group remains fair, transparent, and competitive in comparison with our peers, and that remuneration helps drive our growth strategy and sustainable performance. ### Highlights this year Remuneration in context • We developed a more comprehensive shareholder We achieved strong performance in 2021. Inavolatile market engagement programme, conducting a consultation environment, where in many of our countries wehad customers between the Chair of the Remuneration Committee and whoremained closed for several months, the business has achieved anextensive number of shareholders for the first time. an acceleration of revenues and profitability as well as a faster pace • This followed the AGM and was directly in response of market share gains, with all key metrics above pre-pandemic tofeedback received from shareholders as part of our levels. We have continued to invest in long-term opportunities consultations last year. including the acquisition of Coca‑Cola Bottling Company of Egypt • The key decisions we made this year in relation to and the stake inCaffè Vergnano which expands our coffee strategy; incentiveoutcomes and the implementation of our and we have announced targets and funds toachieve net zero Remuneration Policy were informed by this shareholder carbon emissions by 2040. Our key financial highlights include: consultation process. • FX-neutral revenue growth +20.6% like-for-like . Reported revenues +16.9%; • Volume growth of 14.0% like‑for‑like, or 13% on a reported basis; ### Dear Shareholder • FX-neutral revenue per case up to 5.8% driven by pricing and Our Company and employees continued to rise to revenue growth management strategies; thechallenges of the COVID-19 pandemic during 2021, • Comparable EBIT grew by 23.6% with margins +60bps to 11.6%. Reported EBIT grew by 21.0%; navigating reopenings and recovery while continuing • Operating costs as a percent of revenue improved by 2.2pp, toadapt to new ways of working. While we maintained driven by operating leverage, cost savings higher than plan; and business continuity, the health and safety of our • Strong earnings growth, record high free cash flow and increased workforce has always been our first priority. dividend pay-out target range to 40-50%. TheRemuneration Committee’s decisions during the year were considered in the context of the remuneration ### Stakeholder experience of all our employees and reflect the importance of incentivising and rewarding our most critical employees: Our shareholders those on the front lines serving our customers. The Committee acknowledges that, at our 2021 Annual General Meeting all resolutions were successfully passed with therequisite | Free cash flow (€m) | Comparable EPS (€) | Comparable EBIT | majority, however, there were significant minority votes against | | --- | --- | --- | --- | | | | (€m) | Resolutions 7and 9, the advisory votes to approve the UK | | 601.3 | 1.584 | | | | (2020: 497) | (2020: 1.185) | | Remuneration Report and the Swiss Remuneration Report. | ## 831 (2020: 672) Eachwere passed with the support of approximately 72% of the votescast. | ROIC | NSR (Net sales revenue) | | --- | --- | | 14.8% | 7,168 | | (2020: 11.1%) | (2020: 6,132) | Included in MIP Included in PSP INTEGRATED ANNUAL REPORT 2021 119 Following the AGM, we extended our engagement with shareholders and their proxy advisers on remuneration issues. We reached out to the top 20 shareholders as well as all those who had contacted the Board to express their views, particularly with regard to the targets for the 2018 Performance Share Plan awards. Whilst the Remuneration Committee had sought to ensure that these incentive arrangements continued to align with their original intent given the impact of COVID-19, we acknowledge that not all shareholders were supportive of such adjustments. Through the engagement process, shareholders did express a range of views on other actions the Committee might consider to provide retention and incentivisation to the workforce reflecting the different operating environment presented by COVID-19. The Remuneration Committee believes that the decisions it took were necessary to retain and incentivise the broader management team, in addition to the executive leadership and CEO. These individuals were directly responsible for navigating the Company through the turbulence caused by the COVID-19 pandemic and ensuring the resilience and recovery of the business. In terms of the shareholder experience, our investors have benefited from recent and historical strong financial performance. We have returned €4.1 billion to shareholders over the last two decades with a progressive dividend policy complemented by extraordinary returns through special dividends. In 2021, we paid a dividend of €0.64, a 3.2% increase despite the decline in EPS. This represented a payout ratio of 54%, ahead of our medium-term target of 35-45%, and was proposed to ensure we rewarded shareholders and maintained our commitment to a progressive dividend. While the COVID-19 pandemic is a continuing source of uncertainty globally, based on our business's resilience and future opportunities, the Board has proposed a dividend of €0.71, a 10.9% increase compared with last year. We have committed to continue to make progressive dividend payments in the future. #### Our employees and their remuneration As a continuation to the improvements made in 2020 to enable our workforce to operate effectively, in 2021 we maintained our ongoing dialogue with our employees to listen and understand their needs. I continue to attend the majority of the Works Council meetings and plenary during the year which covers approximately half of our population. I speak with the employee representatives to discuss their thoughts on the Company's relationship with them. The discussions and outcomes are shared in the Remuneration Committee meetings as input for taking wider decisions related to remuneration for the workforce and executives. In reviewing our wider workforce remuneration practices, we prioritised the treatment of our front-line employees: we continue to focus on protecting them and ensuring that their remuneration is treated fairly. Annual increases were awarded to the wider population in 2021 as were incentives, and they are planned again for 2022. We conducted two additional surveys to complement our annual engagement survey to ensure we remained abreast of the views of our employees at a time of significant change and uncertainty. We adjusted our Wellbeing framework to take into account the new ways of working and needs of our employees. Furthermore, we ensured that there were no redundancies made as a result of the impact of the COVID-19 pandemic. Full details of how we cultivated the potential of our people in 2021 can be found on page 41-42. #### Applying the remuneration policy for Directors in 2021 In 2021, Zoran Bogdanovic's salary was increased to €815,000 representing an increase of 3.2%, effective 1 May 2021. Following the freeze in 2020, the Committee believed that as the Company emerged from the COVID-19 pandemic, an increase for the CEO in line with other employees was appropriate. The average increase for our other head office employees was 3.1%. We signalled in last year's Annual Report that the adjustments made to employees and CEO incentive outcomes would continue to try to reflect appropriately the changed environment with the aim to incentivise and retain our broader workforce. The decisions in relation to PSP outcomes followed a similar reasoning to the decisions in 2020, albeit our business had stronger performance in 2021 compared to last year. As mentioned in last year's report, the approach under the MIP changed in 2021, shifting to a multiplicative rather than additive calculation to give more emphasis on business performance over personal performance. The business performance KPIs were simplified to focus on three key metrics: revenue (40% weighting), comparable EBIT (40% weighting) and free cash flow (20% weighting). The formulaic MIP outcome for the CEO was 100% of the maximum opportunity. The Committee applied downward discretion to adjust for the benefit of the sale of the Cyprus plant and to reflect the small amount of government aid due to COVID-19 received in a few countries outside the UK but for which there are no mechanisms available for repayment. The final MIP outcome was 91% of the maximum opportunity. The effect of this adjustment was to reduce the outcome for the CEO by 12.6% of salary. Details of the targets, performance against them and the plan outcomes are set out on page 134. As described in more detail on page 135, the Committee took the decision to adjust targets for the 2019 PSP award. The original targets for this award were set prior to the onset of the pandemic and were no longer appropriate in light of that impact. At the time of revising the targets, the plan would have delivered zero vesting. The Committee took into consideration the financial, operational and strategic performance of the business over the three year period, as well as the shareholder experience including the dividend payouts. The Committee carefully considered the adjusted targets to ensure that they are equally stretched and still represented good performance at threshold and exceptional performance at maximum levels. Performance against the revised targets over the period 2019 to 2021 resulted in a formulaic vesting level of 90% of the maximum PSP award granted in 2019, which excludes the benefit from the sale of the Cyprus plant. The Committee decided to apply downwards discretion to this figure, resulting in a final vesting level of 75% of the maximum. Details of the targets and outcomes are explained on page 135. 120 COCA-COLA HBC ### Directors’ remuneration report continued Looking ahead The Remuneration Committee will continue to keep policies underreview so as to ensure that plans and programmes relating toremuneration support the Company’s strategy and objectives andare closely linked to shareholders’ interests. The Committee ismindful of the evolution in corporate governance requirements andwill continue to review the application of these as it relates toaspects of remuneration. The Remuneration Committee believes that the amended Remuneration Policy approved by shareholders at the AGM in June 2021 remains appropriate and carefully balances alignment with theCompany’s business strategy and our response to evolving corporate governance requirements. As in 2021, for the purposes of the 2022 MIP business performance willbe measured based on performance against three KPIs: revenue ## (40% weighting), comparable EBIT (40% weighting) and free cash Q&A flow (20% weighting). ## Chair of the The Committee intends that 2022 PSP awards will be made subject to the same performance metrics as 2021 awards: ROIC (42.5%), ## Remuneration EPS (42.5%) and reduction of CO 2 emissions (15%). However, ## theCommittee has determined to temporarily postpone target Committee setting in light of the heightened uncertainty as a result of the Russia-Ukraine war. The Group has significant operations in both What was the reason behind the countries. We intend to set targets as soon as possible, within six significant minority vote against months from the standard date of grant and will fully disclose targets the remuneration report last year via RNS atthat time. and what has the Committee done We will proceed with providing the individual grants for the 2022 PSP to address any issues? in March as per usual process. Taking into account the share price The Committee understands from our volatility at the time of grant, the Remuneration Committee will extensive consultation with shareholders retain the right to appropriately apply discretion to the share award that the primary reasons for the votes outcome at the time of vesting, for example to safeguard against against the Annual Report on any inappropriate windfall gains. Remuneration (with 72% in favour) was | In addition, the Committee has welcomed the discussions with | theCommittee’s decision to adjust the | | --- | --- | | shareholders and plans to build on our extensive consultation | performance metrics relating to PSP | | during2021, continuing the productive dialogue with our | vesting in respect of performance up to | | shareholders thisyear. | 31December 2020. | In reaction to the vote, the Committee The role of the Remuneration Committee decided for the first time to conduct The main responsibilities of the Remuneration Committee are to anextensive shareholder consultation, establish the remuneration strategy for the Group and to approve reaching out to many shareholders and compensation packages for Directors and senior management. engaging with all shareholders who Further, the Committee reviews wider workforce remuneration expressed concerns. As the Chair of the policies at Coca‑Cola HBC and the alignment of incentives and Committee, I met with 12 shareholders to rewards with strategy and culture, taking these into account when discuss matters related to remuneration. setting the remuneration policy. The Remuneration Committee We reached out to the top 20 shareholders operates under the Charter for the Committees of the Board of the as well as all those who contacted the Company set forth in Annex C to the Organisational Regulations Board to express concerns, particularly ofthe Company, available on the Group’s website at: https://www. regarding targets for 2018 Performance coca-colahellenic.com/en/ about-us/corporate-governance Share Plan awards. Whilst the Remuneration Members Membership status Committee had sought to ensure that Charlotte J. Boyle (Chair) Member since 2017 these incentive arrangements continued Chair since June 2020 toalign with their original intent given Reto Francioni Appointed June 2016 theimpact of the COVID-19 pandemic, Anna Diamantopoulou Appointed June 2020 weacknowledge that shareholders have In accordance with the UK Corporate Governance Code, the arange of views as to the appropriateness Remuneration Committee consists of three independent non- ofsuch adjustments. Executive Directors: Charlotte J. Boyle (Chair), Reto Francioni The Remuneration Committee believes andAnna Diamantopoulou, who were each last elected by the that the adjustments made were necessary shareholders for a one-year term on 22 June 2021. to retain and incentivise the broader | The Remuneration Committee met four times in 2021; in March, | management team, in addition to the | | --- | --- | | June, September and December. Please refer to the Corporate | executive leadership and CEO. These | | Governance Report on page 92 for details of the Remuneration | individuals were directly responsible | | Committee meetings. | fornavigating the Company through the | turbulence caused by COVID-19 and ensuring the resilience and recovery ofthebusiness. 121INTEGRATED ANNUAL REPORT 2021 How was the impact of the The performance period for the 2019 Is the Committee satisfied with PSPcontained two years (2020 and 2021) COVID‑19 pandemic factored into theuse of ESG metrics in its where the impact of the COVID-19 the target‑setting process for 2021? executive incentives? pandemic was felt. 2019 was a year with In respect of the long-term Performance The Company has used ESG metrics for solid business performance. | Share Plan (PSP), which covers a three- | | either short-term or long-term incentives | | --- | --- | --- | | yearperformance period, the Committee | Fx neutral revenue grew +4.4%. EBIT | for a number of years, reflecting our | | determined that given the uncertainty | margin grew 330 basis points to 10.8%. | approach to responsible, long-term | | around the COVID-19 pandemic, it was | OpEx improved by 80 bps. ROIC expanded | management and the importance of | | prudent to delay the final calibration of | by 50 bps to 14.2%. FCF increased by | ensuring our licence to operate. The CEO’s | | targets for the awards for 2021 until | 20%year on year. EPS increased by 10% | individual performance is measured in key | | therewas greater certainty in the | resulting in 1.436. In order to ensure | strategic areas and taken into account | | macroeconomic environment. | thePSP continued to be effective in its | forMIP. These strategic areas include | | | corepurpose – to motivate and retain | theCompany’s performance in ESG | In line with guidance from the Investment employees (including executives) over benchmarks. The Company received Association, PSP awards were granted for along period – the Committee determined thehighest scores in 8 of the 10 most 2021 in the usual timeframe in March 2021. to adjust the targets to maintain relevancy. recognized ESG benchmarks, DJSI, CDP, PSP targets for 2021 were subsequently In doing so, the Committee put inplace MSCI, ecoact, FTSE4GOOD, MSCI and confirmed and publicly announced in the safeguards to ensure the revised targets Vigeo Eiris. The PSP contains metrics linked autumn of 2021. led to outcomes which were fair forall to a reduction in CO 2 emissions. The CO 2 employees and considered the broader emissions target in the PSP implicitly Did the Company take government stakeholder environment. captures reduction in plastics, which was aid during the year and what were akey driver of its selection as a metric. The Committee considered analyst the views of shareholders on this? forecasts and adjusted the targets to These selected metrics directly align with The Company received a small amount deliver suitable stretch when considering and incentivise delivery of the Company’s ofgovernment aid (amounting to €4.7m in these external reference points. ESG objectives, particularly our ambitious total) – mostly in Italy and Switzerland, and goal to achieve net zero emissions across I note that there was no government aid The Committee noted that, at the time our entire value chain by 2040. | received in the UK. There were different | when COVID-19 first impacted, it was | | | --- | --- | --- | | views from our shareholders regarding the | anticipated that it would not be until 2022 | The achievement of ESG metrics has an | | consideration ofgovernment aid. | that we caught up with the 2020 business | impact on the overall MIP opportunity and | | | plan. In fact, this was achieved in 2021, in | account for 15% of the PSP opportunity. | UK shareholders were firmly of the view spite of the fact that we have continued to The Committee is satisfied that this thatno incentives should pay out where oparate in a ‘non-normal’ environment and issufficient focus in order to achieve support had been taken and not paid back. some of our channels notably HORECA has ourambitious sustainability targets, The Company notes that the mechanisms been impacted by lockdowns. withoutdiluting focus on financial which are in place for repaying support andgrowth objectives. intheUK are not necessarily in place The Committee applied the same treatment inallgeographies. to the 2019 PSP for all employees, with nopreference given to any population. In general, our US shareholders placed more focus on the treatment of employees Alternative approaches to the PSP were Charlotte J. Boyle during the period and were pleased that the also considered such as using discretion Chair of the Remuneration Committee Company did not make any COVID-19 toadjusting vesting or making a larger related redundancies during 2021. award in 2022. Feedback to these alternative approaches was mixed from MIP payouts in relation to 2021 as for 2020 ourshareholders and there was not one were adjusted to exclude the benefits of approach that proved universally acceptable. the aid taken. The formulaic outcome against the adjusted Did the Committee make any targets was vesting of 90% excluding the adjustments to incentive outcomes benefit from the sale of the Cyprus plant. Furthermore, the Committee also decided for 2021? it was appropriate to apply downward As described above, the Company discretion and the awards will vest at 75% receiveda small amount of government of the original grant. aidand the mechanisms are not place for repaying thisin all geographies. As for 2020, the outcome of the 2021 MIP was reduced for the CEO and the Executive Leadership Team totake into account thissupport received and to remove the benefit from the sale of the Cyprus plant. The impact was to reduce the implied formulaic outcome from 100% to 91% ofthe maximum. 122 COCA-COLA HBC ### Directors’ remuneration report continued ### Remuneration throughout the organisation – a snapshot Attracting Recognising Finding the people we want and need Adopting behaviours that produce exceptional performance Retaining Motivating Continuing to attract the best talent Achieving business, financial and non-financial targets Reward strategy and objective All of our remuneration plans, both fixed and variable, are designed The objective of the Group’s remuneration philosophy is to tobe cost‑effective, taking into account market practice, business attract,retain and motivate employees who are curious, agile and performance, and individual performance and experience where committed to high performance. Our reward strategy seeks to relevant. We pay close attention to our shareholders’ views promote a growth mindset and reinforce desirable behaviours, inreviewing our remuneration policy and programmes. ensuring that employees are fairly rewarded and that their individual In line with the UK Corporate Governance Code, the following contributions are linked to the success of the Company. factors, which align well with our objectives, were also considered: Variable pay is an important element of our reward philosophy. • clarity and simplicity: we believe that our policy provides Asignificant proportion of total remuneration for top managers transparency for Executives and shareholders about what (including the Chief Executive Officer and the members of the performance we are looking for across our portfolio; Executive Leadership Team) is tied to the achievement of our • risk: we note the reputational and other risks that can result from business objectives. These objectives are defined by key business excessive rewards and believe that our robust target-setting and metrics that are consistent with our growth strategy and will deliver long history of applying discretion to performance outcome long-term shareholder value. The variable pay element increases addresses this; ordecreases based on the achieved business performance. • predictability and proportionality: we believe that the link between Throughequity‑related long‑term compensation, we seek to individual awards, the delivery of strategy and the long-term ensurethat the financial interests of the Chief Executive Officer, performance of the Company is clearly explained in this report themembers of theExecutive Leadership Team and senior andthat our approach ensures proportionate pay outcomes that managers are aligned with those of shareholders. do not reward poor performance; and • alignment to culture: we want our Executives to make decisions that support the long-term performance and health of the business. ### How we implement our reward strategy The chart below illustrates how we put our reward strategy into practice, with the different remuneration arrangements that apply todifferent employee groups. Chief Executive Chief Executive Officer, Selected middle and All management All employees Officerand Executive Executive Leadership senior management Leadership Team Team and selected senior management Shareholding guidelines Performance Share Plan Long-Term Incentive Plan Management Incentive Employee Share Purchase Plan Plan (dependent on Support the alignment Performance share Cash long-term country practice) | with shareholder | awards vest over three | incentive awards vest | Management | | | --- | --- | --- | --- | --- | | | | | employees may be | The Employee Share | | interests ensuring | years. PSP awards are | over three years. LTIP | | | | | | | eligible to receive an | Purchase Plan | | sustainable | cascaded down to select | awards are cascaded | | | | | | | award under the annual | encourages share | | performance: Chief | senior managers, | down to select middle | | | | | | | bonus scheme that | ownership and aligns | | Executive Officer – | promoting a focus on | and senior management | | | | | | | promotes a high- | theinterests of our | | required to hold shares | long-term performance | to reinforce long-term | | | | | | | performance culture. | employees with those | | in the Company equal in | and aligning them to | performance and ensure | | | | | | | Performance conditions | ofshareholders. | | value to 300% of annual | shareholders’ interests. | retention of our talents. | | | | base salary within | | | are bespoke to the role | | Fixed pay and benefits afive‑year period and and business unit. (base salary, retirement and other benefits – apost‑employment dependent on country shareholding practice) requirement applying Base salaries may reflect from this year. the market value of | Executive Leadership | eachrole as well as the | | --- | --- | | Team – required to hold | individual’s performance | | shares in the Company | and potential. | | equal in value to 100% of | Retirement and other | | annual base salary within | benefits are subject to | | a five-year period. | local market practice. | Note: Participants in the Performance Share Plan are not eligible to participate in the Long‑Term Incentive Plan. INTEGRATED ANNUAL REPORT 2021 123 ## Remuneration arrangements for the Chief Executive Officer – at a glance ![img-28.jpeg](img-28.jpeg) The table below summarises the remuneration arrangements in place for our Chief Executive Officer. See page 133 for total compensation figures. | Pay element | Detail | | --- | --- | | **Base salary** | The base salary of the Chief Executive Officer is €815,000. The base salary of the Chief Executive Officer will be increased by 3.1% to €840,000 with effect from 1 May 2022. | | **Retirement benefits** | The Chief Executive Officer participates in a defined benefit pension plan under Swiss law. Employer contributions are 15% of annual base salary. | | **Other benefits** | Other benefits include (but are not limited to) medical insurance, housing allowance, company car/allowance, cost of living adjustment, trip allowance, partner allowance, exchange rate protection, tax equalisation and tax filing support and advice. Benefit levels vary each year depending on need. | | **ESPP (Employee Share Purchase Plan)** | The Chief Executive Officer may participate in the Company's Employee Share Purchase Plan. As a scheme participant, the Chief Executive Officer has the opportunity to invest a portion of his base salary and/or MIP payments in shares. The Company matches employee contributions on a one-to-one basis up to 3% of base salary and/or MIP payout. Awards are subject to potential application of malus and clawback provisions. | | **MIP (Management Incentive Plan)** | The MIP consists of a maximum annual bonus opportunity of up to 140% of base salary. Payout is based on business performance targets and individual performance. The Business Performance element will result in an outcome between 0% and 200% of the target MIP and the Individual Performance element will result in an outcome of up to 100%, with the overall payout as a percentage of salary being based on the multiplication of these two figures. For 2022, Business Performance will be measured based on performance against three KPIs: revenue (40% weighting), comparable EBIT (40% weighting) and free cash flow (20% weighting). 50% of any MIP payout will be deferred into shares for a further three-year period. Payments are subject to potential application of malus and clawback provisions. | | **PSP (Performance Share Plan)** | The PSP is an annual share award which vests after three years. For the award in 2022, vesting will be based on performance conditions measured over a three-year period against: (i) comparable earnings per share (EPS) (42.5% weighting); (ii) return on invested capital (ROIC) (42.5% weighting); (iii) reduction of CO_{2} emissions (15% weighting). An additional two-year holding period will apply following vesting. Awards are subject to potential application of malus and clawback provisions. | 124 COCA-COLA HBC ### Directors’ remuneration report continued ### Remuneration policy Introduction The following section (pages 124 to 126) sets out our Directors’ remuneration policy as approved by shareholders at the Annual General Meeting in June 2021. No changes are being proposed to the policy this year and the 2021 policy will continue to apply. As a Swiss-incorporated company, we are not required to put forward our remuneration policy for a shareholder vote, but we intend to dosovoluntarily at least every three years (or when there are changes). We continue to endeavour to make sure that our disclosure complies with UK regulations, except where these conflict with Swiss law. Policy table – Chief Executive Officer The Company currently has a single Executive Director, being the Chief Executive Officer. Therefore, for simplicity, this section refers only tothe Chief Executive Officer. This remuneration policy would, however, apply for any new Executive Director role, in the event that one was created during the term of this remuneration policy. In that case, references in this section to the Chief Executive Officer should be read as being to each Executive Director. Fixed Base salary Retirement benefits Purpose and link to strategy Purpose and link to strategy To provide a fixed level of compensation appropriate to the To provide competitive, cost-effective post-retirement benefits. requirements of the role of Chief Executive Officer and to Operation support the attraction and retention of the talent able to deliver The Chief Executive Officer participates in a defined benefit the Group’s strategy. pension plan. However, we have adjusted the pension scheme Operation tobe co‑contributory, in line with the pension scheme for the Salary is reviewed annually, with salary changes normally effective wider Swiss workforce, for new Executive Directors’ on 1 May each year. appointments from 2020 onwards. The following parameters are considered when reviewing the Normal retirement age for the Chief Executive Officer’s plan is 65 base salary level: years. In case of early retirement, which is possible from the age • the Chief Executive Officer’s performance, skills and of 58, the Chief Executive Officer is entitled to receive the responsibilities; amount accrued under the plan as a lump sum. • economic conditions and performance trends; Malus and clawback provisions do not apply to retirement benefits. • experience of the Chief Executive Officer; Maximum opportunity • pay increases for other employees; and The contributions to the pension plan are calculated as a • external comparisons based on factors such as: the industry of percentage of annual base salary (excluding any incentive the business, revenue, market capitalisation, headcount, payments or other allowance/benefits provided) based on age geographical footprint, stock exchange listing (FTSE) and brackets as defined by Fedral Swiss legislation. other European companies. This percentage is currently 15% of base salary and increases to Malus and clawback provisions do not apply to base salary. 18% for age above 55. Maximum opportunity Performance metrics Whilst there is no maximum salary level, any increases awarded None. to the Chief Executive Officer will normally be broadly aligned with the broader employee population. The salary increase made to the Chief Executive Officer may exceed the average salary increase under certain circumstances at the Remuneration Committee’s discretion. These circumstances may include: business and individual performance; material changes to the business; internal promotions; accrual of experience; changes to the role; or other material factors. Performance metrics Individual and business performance are key factors when determining any base salary changes. The annual base salary for the Chief Executive Officer is set out on page 123. 125INTEGRATED ANNUAL REPORT 2021 Other benefits ESPP (Employee Share Purchase Plan) Purpose and link to strategy Purpose and link to strategy To provide benefits to the Chief Executive Officer which are The ESPP is an Employee Share Purchase Plan, encouraging consistent with market practice. broader share ownership, and is intended to align the interests Operation ofemployees and the Chief Executive Officer with those oftheshareholders. Benefit provisions are reviewed by the Remuneration Committee which has the discretion to recommend the introduction of Operation additional benefits where appropriate. This is a voluntary share purchase scheme across many of the Typical provisions for the Chief Executive Officer include benefits Group’s countries. The Chief Executive Officer as a scheme related to relocation such as housing allowance, company car/ participant has the opportunity to invest from 1% to 15% of his allowance, cost of living adjustment, trip allowance, partner base salary and/or MIP payout to purchase the Company’s allowance, exchange rate protection, tax equalisation and tax shares by contributing to the plan on a monthly basis. filing support and advice. For all benefits, the Company will bear The Company matches the Chief Executive Officer’s any income tax and social security contributions arising from contributions on a one-to-one basis up to 3% of the employee’s such payments. base salary and/or MIP payout. Matching contributions are used Malus and clawback provisions do not apply to benefits. to purchase shares one year after the purchase of shares by employees. Matching shares are immediately vested. Maximum opportunity Dividends received in respect of shares held under the ESPP are There is no defined maximum as the cost to the Company used to purchase additional shares and are immediately vested. ofproviding such benefits will vary from year to year. The Chief Executive Officer is eligible to participate in the ESPP Performance metrics operated by the Company on the same basis as other employees. None. Malus and clawback provisions apply. Further details may be found in the Additional notes to the Executive Director’s remuneration policy table section on page 128. Maximum opportunity Maximum investment is 15% of gross base salary and MIP payout. The Company matches contributions up to 3% of gross base salary and MIP payout. Matching contributions are used to purchase shares one year after the matching. Matching shares are immediately vested. Performance metrics The value is directly linked to the share price performance. It is therefore not affected by other performance criteria. Variable pay MIP (Management Incentive Plan) PSP (Performance Share Plan) Purpose and link to strategy Purpose and link to strategy To support profitable growth and reward annually for To align the Chief Executive Officer’s interests with the interests contribution to business performance. The plan aims to promote of shareholders, and increase the ability of the Group to attract a high-performance culture with stretching business and and reward individuals with exceptional skills. individual targets linked to our key strategies. Operation Operation The Chief Executive Officer is granted conditional awards of Annual cash bonus awarded under the MIP is subject to business shares which vest after three years, subject to the achievement and individual performance metrics and is non-pensionable. of performance metrics and continued service. Grants take place The Chief Executive Officer’s individual objectives are regularly annually, normally every March. reviewed to ensure relevance to business strategy and are set Performance metrics and the associated targets are reviewed and approved annually by the Chair of the Remuneration and determined around the beginning of each performance Committee and Chairman of the Board of Directors. period to ensure that they support the long-term strategy Stretching targets for business performance are set annually, andobjectives of the Group and are aligned with based on the business plan of the Group as approved by the Board shareholders’interests. of Directors. The Remuneration Committee will determine the Dividends may be paid on vested shares where the performance business performance metrics and weightings on an annual basis. metrics are achieved at the end of the three-year period. Performance against these targets and bonus outcomes Malus and clawback provisions apply. Further details may isassessed by the Remuneration Committee, which may befound in the Additional notes to the Executive Director’s recommend an adjustment to the payout level where it considers remuneration policy table section on page 128. the overall performance of the Company or the individual’s contribution warrants a higher or lower outcome. Malus and clawback provisions apply. Further details may be found in the Additional notes to the Executive Director’s remuneration policy table section on page 128. 126 COCA-COLA HBC ### Directors’ remuneration report continued Variable pay continued MIP (Management Incentive Plan) PSP (Performance Share Plan) Maximum opportunity Maximum opportunity The Chief Executive Officer’s maximum MIP opportunity is set Awards (normally) have a face value up to 330% of base salary. at 140% of annual base salary. The Business Performance In exceptional circumstances only, the Remuneration Committee element will result in an outcome between 0% and 200% of the has the discretion to grant awards up to 450% of base salary. target MIP and the Individual Performance element will result in an Performance metrics outcome of up to 100%, with the overall payout as a percentage Vesting of awards is subject to the three-year Group performance of salary being based on the multiplication of these two figures. metrics. For each award, the Remuneration Committee will Threshold, target and maximum achievement for the Business determine the applicable metrics, weightings and target calibration Performance element will result in an outcome as follows: making up the performance condition. • Threshold: 0% of base salary Following the end of the three-year period, the Remuneration • Target: 70% of base salary Committee will determine the extent to which performance • Maximum: 140% of base salary metrics have been met and, in turn, the level of vesting. Participants may receive vested awards in the form of shares • The maximum opportunity level will therefore only pay out oracash equivalent. forboth a stretch level of business performance and full achievement of the individual performance element. For each performance metric, achieving threshold performance results in vesting of 25% of the award and maximum performance Performance metrics results in vesting of 100% of the award. There will be a straight-line The MIP awards are based on business metrics linked to our vesting between these performance levels. business strategy. These may include, but are not limited to, Performance share awards will lapse if the Remuneration measures of revenue, profit, profit margins and operating Committee determines that the performance metrics have not efficiencies. The weighting of individual performance metrics shall been met. The Remuneration Committee will have discretion to be determined by the Remuneration Committee around the reduce or negate PSP award vesting, in case of significant adverse beginning of the MIP performance period. environmental, social or governance impacts regarding the Details related to the key performance indicators can be found Company’s activities. inthe Annual Report on Remuneration onpage 134. Holding period Deferral of MIP Any vested award (net of shares sold to cover tax liability) is subject 50% of any MIP award is to be deferred into shares which to a further two‑year holding period following the end ofthe willbemade available after a three‑year deferral period which three-year performance period. During this two-year period, these commences on the first day on the fiscal year in which the beneficially owned shares are subject to a no-sale commitment. deferred share award is made. Any shares subject to the holding period count towards the Deferred shares may be subject to malus and clawback (for a shareholding requirement. period of two years following this incentive award) to the extent Adjustments deemed appropriate by the Remuneration Committee, in line In the event of an equity restructuring, the Remuneration withbest practice. Committee may make an equitable adjustment to the terms of the performance share award by adjusting the number and kind of shares which have been granted or may be granted and/or making provision for payment of cash in respect of any outstanding performance share award. Where exceptional circumstances exist such that the original targets no longer meet the intent at the time of grant, the Committee will have the discretion to adjust targets in a manner that is considered to be no less stretching than the original performance condition. Where any such adjustment is made, the details will be fully disclosed in the following Remuneration Report. Change of control In the event of change of control, unvested performance share awards held by participants vest immediately on a pro-rated basis if the Remuneration Committee determines that the performance metrics have been satisfied or would have been likely to be satisfied at the end of the performance period, unless the Remuneration Committee determines that substitute performance share awards may be used in place of the previous awards. For vested shares subject to the additional holding period, the holding period will lapseand the participants are no longer subject to the no‑salecommitment. INTEGRATED ANNUAL REPORT 2021 127 ## Additional notes to the Executive Director's remuneration policy table ### Chief Executive Officer's remuneration policy illustration The graph below provides estimates of the potential reward opportunity for the Chief Executive Officer and the split between the different elements of remuneration under three different performance scenarios: 'Minimum', 'Target' and 'Maximum'. In line with the reporting regulations, a scenario assuming 50% share price growth over the three-year PSP performance period is also shown below. The assumptions used for these charts are set out in the table below (€ 000s). ![img-29.jpeg](img-29.jpeg) #### Minimum performance Fixed remuneration only, i.e. base salary, pension and other benefits (including ESPP participation). No payout under the MIP or PSP. #### Target performance Fixed remuneration. MIP payout of 70% of base salary. PSP vesting at 181.5% of base salary. #### Maximum performance Fixed remuneration. MIP payout of 140% of base salary. PSP vesting at 330% of base salary. #### Maximum performance + 50% share price growth Fixed remuneration. MIP payout of 140% of base salary. PSP vesting at 330% of base salary. 50% assumed share price growth over three-year PSP performance period. Other than in the 'Maximum performance + 50% share price growth' scenario, no share price growth or dividend assumptions have been included in the charts above. | | Component | Minimum (€ 000s) | Target (€ 000s) | Maximum (€ 000s) | Maximum performance + 50% share price growth (€ 000s) | | --- | --- | --- | --- | --- | --- | | Fixed | Base salary^{1} | €815 | €815 | €815 | €815 | | | Pension | €122 | €122 | €122 | €122 | | | Cash and non-cash benefits^{2} | €877 | €894 | €911 | €911 | | Variable | MIP | – | €571 | €1,141 | €1,141 | | | PSP | – | €1,479 | €2,690 | €2,690 | | | PSP – 50% share price appreciation | – | – | – | €1,345 | | **Total** | | **€1,814** | **€3,881** | **€5,679** | **€7,024** | 1. Represents the annual base salary as at the last review in May 2021. 2. ESPP employer contributions may vary depending on the MIP payout provided that the Chief Executive Officer decides to contribute a portion of the MIP towards the ESPP. The figures provided have been calculated on the basis of the applicable MIP payout and the Chief Executive Officer deciding to contribute 3% to the ESPP. 128 COCA-COLA HSC ## Directors' remuneration report *continued* ### ESOP (Employee Stock Option Plan) The ESOP was replaced by the PSP in 2015 and the last grant under the ESOP took place in December 2014. Although the Remuneration Committee does not intend to award under the ESOP going forward, there are still outstanding stock option awards which may be exercised in future years. Awards vest in one-third increments each year for three years and can be exercised for up to 10 years from the date of the award. ### Malus and clawback provision for variable pay plans The MIP, PSP, ESOP and ESPP plans include malus provisions which give the Remuneration Committee and/or the Board discretion to judge that an award should lapse wholly or partly in event of material misstatement of financial results and/or misconduct, significant reputational risk and corporate failure. The Remuneration Committee and/or Board also has the discretion to determine that clawback should be applied to awards under the MIP, PSP, ESOP and ESPP plans for the Chief Executive Officer and members of the Executive Leadership Team. Clawback can potentially be applied to payments or vested awards for up to a two-year period following payment or vesting. ### Shareholding guidelines In order to strengthen the link with shareholders' interests, the Chief Executive Officer is required to hold shares in the Company equal in value to 300% of annual base salary. Members of the Executive Leadership Team are required to hold 100% of annual base salary. The Chief Executive Officer has five years from appointment to accumulate shares equal to 300% of annual base salary (with shares acquired from PSP awards and shares resulting from the deferral of the 50% of the MIP counting towards fulfilment of the shareholding requirement). The Committee continues to review the potential need for stronger shareholding requirements in the long term and this is subject to further review in the future. The Policy contains a post-employment shareholding requirement whereby the Chief Executive Officer would, if leaving the Company, be required to hold shares equivalent to 200% of base salary (or actual shareholding at termination date if lower than this) for a period of two years after leaving employment. ### Remuneration arrangements across the Group The remuneration approach for the Chief Executive Officer, the members of the Executive Leadership Team and senior management is similar. The Chief Executive Officer's total remuneration has a significantly higher proportion of variable pay in comparison with the rest of our employees. The Chief Executive Officer's remuneration will increase or decrease in line with business performance, aligning it with shareholders' interests. The structure of the remuneration package for the wider employee population takes into account local market practice and is intended to attract and retain the right talent, be competitive and remunerate employees for promoting a growth mindset while contributing to the Group's performance. As part of the Performance for Growth framework introduced in 2019, we revised and updated the remuneration framework with features such as each business unit having more flexibility on target positioning, managers having the flexibility to retain key talent, and guidance provided for increased awards for high-potential and/or exceptional performance. ### Policy table – non-Executive Directors #### Base fees ##### Purpose and link to strategy To provide a fixed level of compensation appropriate to the requirements of the role of non-Executive Director and to attract and retain high-quality non-Executive Directors with the right talent, values and skills necessary to provide oversight and support to management to grow the business, support the Company's strategic framework and maximise shareholder value. ##### Operation Non-Executive Directors' fees are set at a level that will not call into question the objectivity of the Board. When considering market levels, comparable companies typically include those in the FTSE index with similar positioning as the Company, other Swiss companies with similar market capitalisation and/or revenues, and other relevant European listed companies. ##### Maximum opportunity Fee levels for non-Executive Directors include an annual fixed fee plus additional fees for membership of Board committees when applicable, as summarised below for the period from the AGM June 22, 2021 to AGM June 2022. The proposed fees which will be voted on at the next AGM can be found on page 136: - Base non-Executive Director's fee: €73,500 - Senior Independent Director's fee: €15,800 - Audit and Risk Committee Chair fee: €28,900 - Audit and Risk Committee member fee: €14,500 - Remuneration, Nomination and Social Responsibility Chair fees: €11,600 - Remuneration, Nomination and Social Responsibility member fees: €5,800 Fee levels are subject to periodic review and approval by the Chairman of the Board and the Chief Executive Officer. ##### Other benefits Non-Executive Directors do not receive any benefits in cash or in kind. They are not entitled to severance payments in the event of termination of their appointment. They are entitled to reimbursement of all reasonable expenses incurred in the interests of the Group. ##### Variable remuneration Non-Executive Directors do not receive any form of variable compensation. 129INTEGRATED ANNUAL REPORT 2021 ### Legacy arrangements For the avoidance of doubt, it is noted that the Company will honour any commitments entered into that have previously been disclosed toshareholders. ### Policy on recruitment/appointment Executive Directors Annual base salary arrangements for the appointment of an Executive Director will be set considering market relevance, skills, experience, internal comparisons and cost. The Remuneration Committee may recommend an appropriate initial annual base salary below relevant market levels. In such situations, the Remuneration Committee may make a recommendation to realign the level of base salary in the following years. As highlighted above, annual base salary ‘gaps’ may result in higher rates of salary increase in the short term, subject toanindividual’s performance. The discretion is retained to offer an annual base salary necessary to meet the individual circumstances oftherecruited Executive Director and to enable the hiring of an individual with the necessary skills and expertise. The maximum level of variable pay that may be offered will follow the rules of the MIP and is capped at 140% of the relevant individual’s annual base salary. The maximum level of equity-related pay that may be offered will follow the PSP rules and is capped at 450% of the relevant individual’s annual base salary. The typical award is not expected to surpass 330% of base salary. Different performance measures may be set initially for the annual bonus taking into consideration the point in the financial year that a new Executive Director joins. The above limits do not include the value of any buyout arrangements. Benefits will be provided in line with the Group’s policy for other employees. If an Executive Director is required torelocate, benefits may be provided as per the Group’s international transfer policy which may include transfer allowance, tax equalisation, tax advice and support, housing, cost of living, schooling, travel and relocation costs. The Remuneration Committee may consider recommending the buying out of incentive awards that an individual would forfeit by accepting the appointment up to an equivalent value in shares or in cash. In the case of a share award, the Remuneration Committee may approve agrant of shares under the PSP. When deciding on a potential incentive award buyout and in particular the level and value thereof, the Remuneration Committee will be informed of the time and performance pro-rated level of any forfeited award. It is expected that Executive Directors appointed during the remuneration policy period will be appointed on similar notice provisions totheChief Executive Officer, allowing for termination of office by either party on six months’ notice. Non‑Executive Directors It is expected that non-Executive Directors appointed during the remuneration policy period will receive the same basic fee and, as appropriate, committee fee or fees as existing non-Executive Directors and will be entitled to reimbursement of all reasonable expenses incurred in the interests of the Group. It is expected that non-Executive Directors appointed during the remuneration policy period will be appointed on a one-year term ofappointment, in the same manner as existing non‑Executive Directors. The Company does not compensate new non-Executive Directors for any forfeited share awards in previous employment. Termination payments The Swiss Ordinance against Excessive Compensation in Listed Companies limits the authority of the Remuneration Committee andtheBoard to determine compensation. Limitations include the prohibition of certain types of severance compensation. Our governance framework ensures that the Group uses the right channels to support reward decisions. In the case of early termination, thenon‑Executive Directors would be entitled to their fees accrued as of the date of termination, but are not entitled to any additional compensation. The Chief Executive Officer’s employment contract does not contain any provisions for payments on termination. Notice periods are set for up to six months and non-compete clauses are 12 months. The notice period anticipates that up to six months’ paid garden leave may be provided. Similarly, up to 12 months of base salary may be paid out in relation to the non-compete period. In case of future terminations, payments will be made in accordance with the termination policy on page 130. 130 COCA-COLA HBC ### Directors’ remuneration report continued Good leaver | | (retirement at 55 or later/at | Good leaver | Bad leaver | | --- | --- | --- | --- | | Pay element | least 10 years’ continued service) | (injury, disability) | (resignation, dismissal) Death in service | | Base salary and | Payment in lieu of notice is not permissible. The Company could ask the Chief Executive Officer | | | | other benefits / | to be on paid garden leave for up to six months. | | | non-Executive Directors’ fees ESPP Unvested cash allocations held in the ESPP Unvested cash allocations Available ESPP shares will will vest upon termination. under the ESPP are be transferred to heirs. forfeited. MIP A pro-rated payout as A pro-rated payout as In the event of resignation A pro-rated payout will be ofthe date of retirement ofthedate of leaving will ordismissal, as per Swiss applied and will be paid will be applied. beapplied. law, the Chief Executive immediately to heirs, Officer is entitled to a basedon the latest rolling Deferred shares will Deferred shares will pro‑rated MIPpayout. estimate. continue to vest as normal. continue to vest as normal. Any outstanding deferred Deferred shares will shares will lapse. continue to vest as normal. PSP/ESOP All unvested options and All unvested options and All unvested options and All unvested options and performance share awards performance share awards performance share awards performance share awards continue to vest as normal immediately vest to the immediately lapse without immediately vest subject subject to time pro-rating extent that the any compensation. totime and performance and are subject to the Remuneration Committee pro-rating. In the event of resignation, additional holding period. determines that the all vested options must be Any options that vest are performance conditions For vested shares that are exercised within six months exercisable within 12 have been met, or are likely subject to the additional from the date of months from the date to be met at the end of the holding period, they will termination. oftermination. three-year performance continue to be subject to Upon dismissal, all vested For vested shares that are period and are subject to the the no-sale commitment options must be exercised subject to the additional additional holding period. until the end of the relevant | | | within 30 days from the date | holding period, the no-sale | | --- | --- | --- | --- | | two-year period. | Any options that vest are | | | | | | of termination. | commitment will cease | exercisable within 12 Under Swiss law, share immediately. For vested shares that are months from the date awards are considered subject to the additional Under Swiss law, share oftermination. annual compensation | | | holding period, they will | awards are considered | | --- | --- | --- | --- | | andas such when time | For vested shares that are | | | | | | continue to be subject to | annual compensation | | pro-rating is required, the | subject to the additional | | | | | | the no-sale commitment | andas such when time | | year of grant (12 months) | holding period, they will | | | | | | until the end of the relevant | pro-rating is required, the | | and not the vesting period | continue to be subject to | | | | | | two-year period. | year of grant (12 months) | | (36 months) for time | the no-sale commitment | | | and not the vesting period pro-rating calculations until the end of the relevant (36 months) for time isconsidered. two-year period. pro-rating calculations isconsidered. Corporate events In the event of an equity restructuring, the Remuneration Committee may make an equitable adjustment to the terms of the performance share award by adjusting the number and kind of shares that have been granted or may be granted and/or making provision for payment ofcash in respect of any outstanding performance share award. In the event of a change of control, unvested performance share awards held by participants vest immediately on a pro-rated basis if the Remuneration Committee determines that the performance conditions have been satisfied or would have been likely to be satisfied at the end of the performance period, unless the Remuneration Committee determines that substitute performance share awards may be used inplace of the previous awards. 131INTEGRATED ANNUAL REPORT 2021 Service contracts Zoran Bogdanovic, the Chief Executive Officer, has a service contract with the Company with a six‑month notice period. As noted in the Termination payments section on page 129, the Chief Executive Officer’s employment contract does not include any termination benefits, other than as mandated by Swiss law. The Swiss Code of Obligations requires employers to pay severance when an employment relationship ends with an employee of at least 50 years of age after 20 years or more of service. The Chief Executive Officer is also entitled to reimbursement of all reasonable expenses incurred in the interests of the Company. In accordance with the Swiss Ordinance against Excessive Compensation in Listed Companies, there are no sign-on policies/provisions forthe appointment of the Chief Executive Officer. The table below provides details of the current service contracts and terms of appointment for the Chief Executive Officer and other Directors. Unexpired term of service | | Date originally appointed to the | Date appointed to the | contract or appointment as | | --- | --- | --- | --- | | Name Title | Board of the Company | Board of the Company | non-Executive Director | | Anastassis G. David Chairman and | 27 July 2006 22 June 2021 One year | | | non‑ExecutiveDirector Zoran Bogdanovic Chief Executive Officer 11 June 2018 22 June 2021 Indefinite, terminable onsix months’ notice Charlotte J. Boyle Non-Executive Director 20 June 2017 22 June 2021 One year Henrique Braun Non-Executive Director 22 June 2021 22 June 2021 One year Olusola (Sola) David‑Borha Non-Executive Director 24 June 2015 22 June 2021 One year Anna Diamantopoulou Non-Executive Director 16 June 2020 22 June 2021 One year William W. (Bill) Douglas III Non-Executive Director 21 June 2016 22 June 2021 One year Reto Francioni Senior Independent 21 June 2016 22 June 2021 One year non-Executive Director Anastasios I. Leventis Non-Executive Director 25 June 2014 22 June 2021 One year Christo Leventis Non-Executive Director 25 June 2014 22 June 2021 One year Alexandra Papalexopoulou Non-Executive Director 24 June 2015 22 June 2021 One year Bruno Pietracci Non-Executive Director 22 June 2021 22 June 2021 One year Ryan Rudolph Non-Executive Director 21 June 2016 22 June 2021 One year The Chief Executive Officer’s service contract and the terms and conditions of appointment of the non-Executive Directors are available forinspection by the public at the registered office of the Group. Consideration of employee views The Remuneration Committee does not currently consult specifically with employees on policy for the remuneration of the Chief Executive Officer. Pay movement for the wider employment group is considered when making pay decisions for the Chief Executive Officer. The Chair of the Remuneration Committee is also the designated non-Executive Director for workforce engagement. As such, she attends meetings of our European Works Council and meets with elected employee representatives from our businesses in EU countries. She then reports back to the Board on her observations and matters raised by employees, ensuring Board and Remuneration Committee deliberations and decision-making are fully informed. Consideration of shareholder views Shareholder views and the achievement of the Group’s overall business strategies have been taken into account in formulating the remuneration policy. Following shareholder feedback before and after the Annual General Meeting, the Remuneration Committee and the Board consult with shareholders and meet with institutional investors to gather feedback on the Company’s remuneration strategy and corporate governance. The Company would be happy to engage with shareholders in the future to discuss the outcomes of the remuneration policy. In reviewing and determining remuneration, the Remuneration Committee takes into account the following: • the business strategies and needs of the Company; • the views of shareholders on Group policies and programmes of remuneration; • the alignment of remuneration policy with the principles of clarity, simplicity, risk, predictability, proportionality and alignment with culture; • market comparisons and the positioning of the Group’s remuneration relative to other comparable companies; • input from employees regarding our remuneration programmes; • the need for similar, performance-related principles for the determination of executive remuneration and the remuneration of other employees; and • the need for objectivity. Board members, the Chief Executive Officer and Executive Leadership Team members play no part in determining their own remuneration. The Chair of the Remuneration Committee and the Chief Executive Officer are not present when the Remuneration Committee and the Board discuss matters that pertain to their remuneration. This ensures that the same performance-setting principles are applied for Executive remuneration and for other employees in the organisation. 132 COCA-COLA HSC # **Directors' remuneration report** *continued* # **Annual Report on Remuneration** # **Introduction** This section of the report provides detail on how we have implemented our remuneration policy in 2021 which, in accordance with the UK remuneration reporting regulations, will be subject to an advisory shareholder vote at our 2022 Annual General Meeting. # **Activities of the Remuneration Committee during 2021** During 2021, the key Remuneration Committee activities were to: - undertake extensive shareholder consultation to understand different views on our remuneration approach and explain the Committee's decisions; - review and sign off the 2020 Directors' Remuneration Report; - review the 2021 base salary for the Chief Executive Officer; - review and approve the 2021 base salaries for the Executive Leadership Team members and general managers; - review and approve the 2020 MIP payout for the Chief Executive Officer; - review and approve payout levels for the 2020 MIP in relation to Executive Leadership Team members and general managers; - review and approve the performance achievement of the 2018 PSP award, number of shares vesting and dividend equivalents; - set and approve 2021 PSP targets; - review award levels for 2021 PSP awards; - determine the adjustments to the operation of the MIP and PSP to ensure that they continued to align with their original intent taking the impact of the COVID-19 pandemic into account; - review short and long-term incentives arrangements for the wider workforce; and - review the assets of the Company's Irish defined benefit pension plans. # **Advisers to the Remuneration Committee** The Chief People and Culture Officer, the Head of Rewards and the General Counsel regularly attend meetings of the Remuneration Committee. While the Remuneration Committee does not have external advisers, in 2021 it authorised management to work with external consultancy firm Willis Towers Watson, which provided independent advice on ad hoc remuneration issues during the year. These services are considered to have been independent, objective and relevant to the market. Other than employee engagement benchmarking services, Willis Towers Watson does not provide any other services to the Company or to any individual director. The total cost in connection with this work was €31,622, invoiced on a time spent basis. Willis Towers Watson is a member of the Remuneration Consultants Group and provides advice in line with its Code of Business Conduct. Considering this, and the level and nature of the service received, the Committee remains satisfied that the advice is objective and independent. 133INTEGRATED ANNUAL REPORT 2021 Non‑Executive Directors’ remuneration for the years ended 31 December 2021 and 2020 | | | | | | | | | | Social | | | Senior | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Audit and Risk | | Remuneration | | Nomination | | Responsibility | | | Independent | | | Social security | | | | Financial | | | | | | | | | | | | | | | 2 | Total | | | | Committee | | Committee | | Committee | | Committee | | | | Director | | contributions | | | | year Base fee | 1 (€) | | | | | | | | | | | | | | (€) | (€) | | | | | (€) | | (€) | | (€) | | | (€) | | | (€) | | | | Anastassis G. David FY2021 73,500 – – – – – – 73,500 FY2020 73,500 – – – – – – 73,500 Charlotte J. Boyle FY2021 73,500 – 11,600 5,800 – – – 90,900 FY2020 73,500 – 5,800 5,800 – – – 88,000 3 Henrique Braun FY2021 36,750 – – – – – 2,988 39,738 FY2020 – – – – – – – – Olusola (Sola) David-Borha FY2021 73,500 14,500 – – – – 7,156 95,156 FY2020 73,500 14,500 – – – – 7,134 95,134 4 Anna Diamantopoulou FY2021 73,500 – 5,800 5,800 5,800 – 7,392 98,292 FY2020 36,750 – 2,900 2,900 2,900 – 3,685 49,135 William W. (Bill) Douglas lll FY2021 73,500 28,900 – – – – – 102,400 FY2020 73,500 28,900 – – – – – 102,400 Reto Francioni FY2021 73,500 – 5,800 11,600 – 15,800 6,399 113,099 FY2020 73,500 – 5,800 11,600 – 15,800 7,700 114,400 Anastasios I. Leventis FY2021 73,500 – – – 11,600 – – 85,100 FY2020 73,500 – – – 11,600 – – 85,100 Christo Leventis FY2021 73,500 – – – – – – 73,500 FY2020 73,500 – – – – – – 73,500 Alexandra Papalexopoulou FY2021 73,500 14,500 – – – – – 88,000 FY2020 73,500 7,250 5,800 2,900 2,900 – 3,263 95,613 5 Bruno Pietracci FY2021 36,750 – – – 2,900 – 3,224 42,874 FY2020 – – – – – – – – 6 José Octavio Reyes FY2021 36,750 – – – 2,900 – 2,249 41,899 FY2020 73,500 – – – 5,800 – 4,456 83,756 7 Alfredo Rivera FY2021 36,750 – – – – – – 36,750 FY2020 73,500 – – – – – – 73,500 Ryan Rudolph FY2021 73,500 – – – – – 5,977 79,477 FY2020 73,500 – – – – – 5,958 79,458 1. Non-Executive Director fees for 2021 were in line with the fees that were revised in 2018. 2. Social security employer contributions as required by Swiss legislation. 3. Henrique Braun was appointed to the Board of Directors on 22 June 2021. The Group applied a half‑year period base fee. 4. Anna Diamantopoulou was appointed to the Board of Directors on 16 June 2020. The Group applied a half‑year period base fee. 5. Bruno Pietracci was appointed to the Board of Directors on 22 June 2021. The Group applied a half‑year period base fee. 6. José Octavio Reyes retired from the Board of Directors on 22 June 2021. The Group applied a half‑year period base fee. 7. Alfredo Rivera retired from the Board of Directors on 22 June 2021. The Group applied a half‑year period base fee. Non-Executive Directors do not participate in any of the Group’s incentive plans, nor do they receive any retirement or other taxable benefits. Fee levels in the table above were last reviewed in 2018 and no change was made for 2021. Single figure table Single total figure of remuneration for the Chief Executive Officer for the years ended 31 December 2021 and 2020. | | | Cash and non-cash | | | | | | Employee Share | | | | | | Retirement | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Base pay | 1 | | | 2 | Annual bonus | | 3 | | | 4 | Long-term incentives | | 5 | | 6 | Total single figure | | | | | | benefits | | | | | Purchase Plan | | | | | | benefits | | | | | € 000s | | | € 000s | | | € 000s | | | € 000s | | | € 000s | | € 000s | | | € 000s | 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Zoran Bogdanovic 807 790 853 651 1,038 407 30 32 2,061 1,325 133 135 4,921 3,340 1. ‘Base pay’ includes the monthly instalments linked to the base salary for 2021 and 2020. 2. ‘Cash and non-cash benefits’ includes the value of all benefits paid during 2021. These are outlined in the ‘Cash and non-cash benefits’ section on page 134 and include any gross-ups for the tax benefit. 3. Annual bonus for 2021 includes the MIP payout, receivable early in 2022 for the 2021 performance year, including the amount deferred in shares. 4. ‘Employee Share Purchase Plan’ reflects the value of Company matching share contributions under the ESPP. 5. ‘Long-term incentives’ for 2021 reflects the 2019 awards made under the Performance Share Plan and the dividend equivalent shares paid on PSP shares that will vest in early 2022. The number of shares due to vest to the Chief Executive Officer for the 2019 award is 65,435. The Chief Executive Officer will also get 4,324 shares representing the dividend equivalents for the awarded shares for 2019, 2020 and 2021. The value reflects the number of shares multiplied by the average market price over the last three months of the financial year. The figure will be restated in next year’s report based on the share price at vesting (as has been done for the 2018 award in the 2020 figure above). €81,574 of the €2,060,637 total vested value of the 2019 award was due to increase in share price since date of grant. 6. ‘Retirement benefits’ includes the pension plan under Swiss law. Employer contributions are 15% of annual base salary. The disclosed figure also includes risk and administration costs of €11,042. 134 COCA-COLA MBC # Directors' remuneration report continued # Fixed pay for 2021 # Base salary In 2021, Zoran Bogdanovic's salary was increased to €815,000 representing an increase of 3.2% effective 1 May 2021. Following the freeze in 2020, the Committee believed that as the Company emerged from the COVID-19 pandemic, an increase for the CEO in line with other employees was appropriate. The average increase for our other head office employees was 3.1%. # Retirement benefits Zoran Bogdanovic receives an annual retirement benefit of 15% of base salary, aligning to the retirement benefit provided under Swiss law and based on the age brackets defined by federal Swiss legislation. During the year, €133,042 of retirement benefit was received inclusive of €11,042 for risk and administration costs. # Cash and non-cash benefits Zoran Bogdanovic received additional benefits during 2021. These included cost of living and foreign exchange rate adjustment (€281,406), private medical insurance (€17,841), partner allowance (€1,000), home trip allowance (€3,084), tax support (€16,239), company car (€26,439), housing allowance (€105,952), Company matching contribution related to the ESPP (€30,303 – reflecting the maximum match of 3% under the plan), tax equalisation (€292,134), and the value of social security contributions (€108,400). # Variable pay for 2021 # MIP performance outcomes – 2021 2021 was the first year in which the Company operated a multiplicative annual bonus under which the payout is calculated by multiplying the outcome from the Business Performance element by the outcome for the Individual Performance element. The Business Performance element for the 2021 MIP was based on the following metrics: - Net Sales Revenue, with an opportunity of 56% of salary for maximum performance (28% of salary for target performance). - Comparable EBIT, with an opportunity of 56% of salary for maximum performance (28% of salary for target performance). - Free cash flow, with an opportunity level of 28% of salary for maximum performance (14% of salary for target performance). The outcome of the Business Performance element is multiplied by the outcome for the Individual Performance element. The financial metrics, the associated targets and level of achievement are set out below. The CEO's individual performance was determined based on to receiving the highest scores in 8 out of the 10 most recognized ESG benchmarks, ranking 8 in Refinitiv's Diversity and Inclusion Index. Employee Sustainable Engagement maintained at the same level, completion of strategic M&A projects such as the acquisition of Coca-Cola Bottling Company of Egypt, the stake in Caffé Vargnano, and the financial results which surpassed the consensus and 2020 financial results. A few of our business units received government in the first half of the year in 2021 amounting to 4.7m EUR. There was no mechanism in place to return those funds. In addition, the results were positively impacted by the sale of the Cyprus plant. Therefore, the Committee took the decision to apply discretion to reduce the formulaic outcome of the MIP for the CEO and the Executive Leadership Team. As such the formulaic business results would have been 200% resulting in 140% of the salary. | | Threshold (0%) | Target (100%) | Maximum (200%) | Achievement | Annual Bonus (base salary) | | --- | --- | --- | --- | --- | --- | | **Net Sales Revenue (€m)** | **6,279.0** | **6,825.0** | **7,166.3** | **7,168.4** | **56%** | | **Comparable EBIT (€m)** | **708.3** | **769.9** | **831.5** | **831.0** | **56%** | | **Free Cash Flow (€m)** | **381.8** | **415.0** | **456.5** | **601.3** | **28%** | | **Total (Business Performance multiplied by individual performance)** | | | | | **140%** | Application of downward discretion by the Remuneration Committee (12.6%) Final outcome 127.4% of the base salary The Remuneration Committee considered the above formulaic outcome to ensure that it was both fair and appropriate given the wider stakeholder experience described above. The Committee adjusted the outcome downwards in relation to the small amount of government support received and to offset the benefit from the sale of Cyprus plant to result in 127.4% of the salary of the Chief Executive Officer. The annual bonus award in respect of the 2021 financial year for the Chief Executive Officer was therefore €1,038,310. In accordance with the terms of the MIP, 50% of the award will be paid out in March 2022 and the remaining 50% will be deferred into shares for a period of three years. MIP payouts are not driven by share price appreciation. 135INTEGRATED ANNUAL REPORT 2021 Performance Share Plan (PSP) awards – 2021 The PSP is the Company’s primary long-term incentive vehicle. In March 2021, the Chief Executive Officer was granted a performance share award over 97,206 shares under the PSP, representing 330% of base salary at date of grant. The award is subject to a three-year performance period, aligned to the Company’s financial year, with performance measured to the end offinancial year 2023, and vesting anticipated in March 2024. These vested shares will then be subject to a further two‑year holding period, and the Chief Executive Officer agrees to a no-sale commitment during this time. The following table sets out the details of the performance share award made to the Chief Executive Officer under the PSP for 2021. Type of award made Performance share award over 97,206 shares, receivable for nil cost Share price at date of grant €27.66 (£23.80) Date of grant 18 March 2021 Performance period 1 January 2021 to 31 December 2023 Face value of the award €2,688,718 (The maximum number of shares that would vest if all performance measures and targets are met, multiplied by the share price atthedate of grant) Face value of the award as a % of annual base salary 330% Percentage that would be distributed if threshold performance 25% of maximum award wasachieved in both PSP key performance indicators Percentage that would be distributed if threshold performance 12.5% of maximum award wasachieved only in one PSP key performance indicator Similar to the award made in March 2020, the 2021 award was subject to comparable earnings per share (EPS) and return on invested capital (ROIC) targets as outlined below, and for the 2021 award a sustainability metric was introduced as set out below. The reduction in greenhouse gas emissions metric was selected to directly align with and incentivise delivery of the Company’s ESG objectives, particularly our ambitious goal to achieve net zero emissions across our entire value chain by 2040. The CO 2 emissions target inthe PSP implicitly captures reduction in plastics, which was a key driver of its selection as a metric. Threshold Maximum | | | Vesting | Vesting (% | | | --- | --- | --- | --- | --- | | Measure Description Weighting Target | | (% of max) Target | | of max) | | Comparable EPS Calculated by dividing the comparable net profit attributable | 42.5% 1.63p 25% 1.89p 100% | | | | to the owners of the parent by the weighted average number ofoutstanding shares during the period. Return on invested ROIC is the percentage return that a company makes on 42.5% 13.0% 25% 14.9% 100% capital (ROIC) its invested capital. More specifically, we define ROIC as the percentage of comparable net profit excluding net finance costs divided by the capital employed. Capital employed is calculated as the average of net debt and shareholders’ equity attributable to the owners of the parent through the year. Reduction in CO 2 This target supports the Company’s ambitious goal to achieve 15% 3.973 25% 3.758 100% emissions net zero emissions across its entire value chain by 2040. Aligned with science and 1.5 degree Celsius scenarios and approved by the Science Based Targets initiative (SBTi) and calculated as thousand tonnes of CO 2 emissions equivalent. The vesting schedule for PSP performance conditions is a straight line between the threshold and maximum performance levels. Performance Share Plan (PSP) outcomes of the 2019-2021 award • Due to the COVID-19 impact on the business, the Committee has considered that the stretch built into the target ranges for the 2019-2021 PSP awards prior to the onset of the pandemic were inappropriate in light of that impact. We wished to recognise our widermanagement team’s efforts in achieving exceptional business outcomes and ensure their continued drive and commitment. TheCommittee therefore determined to adjust the targets to maintain relevance. In doing so, the Committee put in place safeguards toensure the revised targets led to outcomes which were fair for all employees. • The Committee considered analyst forecasts and adjusted the targets to be stretching when considering these external reference points. • The Committee applied the same treatment to the 2019 PSP for all employees, with no preference given to any population. • Alternative approaches to the PSP were considered, such as using discretion to adjust vesting or making a greater award in 2022. Ultimately, the Committee was of the view that a formulaic adjustment to targets best maintained the purpose of the PSP and did not leadto overall increases in future target pay.The revised targets are equally stretching and still represent good performance at threshold levels and exceptional performance at maximum levels, which would deliver superior returns to shareholders. 136 COCA-COLA HBC ### Directors’ remuneration report continued Threshold Maximum | | | Vesting | Vesting | | --- | --- | --- | --- | | | Measure Weighting Target | (% of max) Three-year target | (% of max) | | Original targets | Comparable EPS 50% 1.62 25% 1.80 100% | | | | of2019 award | ROIC 50% 13.8% 25% 15.8% 100% | | | Total | | | | Threshold Maximum Actual | (% of max) | | | --- | --- | --- | --- | --- | --- | | | Measure Weighting | Target Vesting Target Vesting Achievement Vesting | | | | | Revised targets | Comparable EPS 50% 1.39 25% 1.59 100% 1.54 81% | | | | 90% | | of2019 award | ROIC 50% 12.5% 25% 14.3% 100% 14.362 100% | | | | | Application of downward discretion by the Remuneration Committee (15%) Final outcome 75% of max In proposing these adjustments, the following is noted: • Prior to the impact of the pandemic, targets were calibrated such that awards were expected to vest at around 50% of maximum for strong performance. The same stretch applied to revised targets, namely that these awards were expected to vest at around 50% ofmaximum for strong performance. • We took into account analysts’ consensus forecasts and ensured that targets were stretched beyond that (as we did in 2020) to reduce outcomes as if government aid monies had not been received. • The changes in the table above would apply to all PSP participants throughout the organisation, which represents approximately 50 individuals (including the Executive Leadership Team and CEO) allowing them to be appropriately rewarded and share in the success ofanyfuture good performance. • The Committee took into careful consideration the varied shareholder feedback we received during consultation and continues to be mindful of it in relation to subsisting awards. While some of our shareholders expressed concern over adjusting long-term incentive targets, others indicated they would not be averse to a change in the targets for the 2019 and 2020 awards – understanding our rationale for the need forchange, provided that we explain clearly our thinking and apply equally rigorous and stretching targets as the ones we originally applied atthe time of award. We have aimed to follow this as a a primary principle. The formulaic outcome against the adjusted targets was vesting of 90% of the maximum with the exclusion of the benefit of the sale oftheCyprus plant. Furthermore, the Committee took a step back and considered all factors in the round, including both the shareholder experience and employee experience, and determined that it was appropriate to apply downward discretion and reduce the outcome to 75% of maximum for all 50 participants, including the CEO and Executive Leadership Team. If no adjustment had been made to the performance conditions, the payout under the 2019 PSP award would have been 23%. 2020 PSP awards Many of the same considerations outlined above in relation to the 2019 PSP awards apply in the same way to 2020 PSP awards. TheCommittee continues to keep under review the appropriateness of the targets for the 2020 PSP awards and whether adjustments should be made in light of the prevailing environment at the time. It is also mindful of ensuring any incentive outcomes are always fair andappropriate in the round. Anyapproach will ultimately intend to represent good performance at threshold levels and exceptional performance at maximum levels, which would deliver superior returns to shareholders. Dilution limit Usage of shares under all share plans and executive share plans adheres to the dilution limits set by the Investment Association Principles ofRemuneration (10% for all share plans and 5% for all executive share plans, in any 10‑year period). Implementation of policy in 2022 For 2022, we will continue to apply the remuneration policy approved by shareholders in 2021, as outlined on pages 124 to 126. Base salary and fees The Chief Executive Officer’s base salary was reviewed in March 2022. The base salary will be increased by 3.1% to €840,000 effective 1May2022. Although 2022 salary increase levels for employees have not been confirmed at the date of this report, it is anticipated that theChief Executive Officer’s increase will be in line with the increases provided for the wider workforce. Chairman and Board fees were reviewed for the first time since 2018 and the following increases shall apply, effective following the AGM: | | Current fees | With effect | | | --- | --- | --- | --- | | | (unchanged | from the date | | | Non-Executive Directors’ fees | since 2018) | | of AGM | Chairman fee €73,500 €150,000 Basic fee €73,500 €82,000 Senior Independent Director €15,800 €18,000 Audit and Risk Committee Chair €28,900 €32,000 Audit and Risk Committee member €14,500 €16,000 Remuneration/Nomination/Social Responsibility Committee Chair €11,600 €13,000 Remuneration/Nomination/Social Responsibility Committee member €5,800 €6,500 The increase for the Chairman better reflects the time commitment required for the role and the Committee notes that the new fees remain below market levels. INTEGRATED ANNUAL REPORT 2021 137 ## Management Incentive Plan (MIP) As of 2021, the MIP operates on a multiplicative basis – i.e. the outcome will be determined by Business Performance multiplied by Individual Performance, which means that unless the business performance targets are achieved no bonus will be payable. Business Performance is measured based on performance against three KPIs: revenue (40% weighting), comparable EBIT (40% weighting) and free cash flow (20% weighting). Targets are considered to be commercially sensitive but will be disclosed on a retrospective basis in next year's remuneration report. For target performance against this element the outcome will be 70%, rising to 140% for maximum performance. For the CEO, Individual Performance will be assessed based on the achievement of defined strategic objectives. Based on the Remuneration Committee's assessment of performance against these strategic objectives, the outcome for the Individual Performance element may be up to 100%. The maximum opportunity level (which would reflect both a stretch level of business performance and full achievement of the individual strategic objectives) for the CEO will be 140% of base salary, which is unchanged from 2021. ## Performance Share Plan (PSP) The levels of PSP awards for 2022 are anticipated to be in line with those awarded in 2021 – i.e. 330% of base salary for the Chief Executive Officer. It is intended that, as in past years, the three-year performance conditions applicable to the award will continue to be based on ROIC and EPS as well as the reduction of CO$_{2}$ emissions metric which was first introduced in 2021. The weightings will be ROIC: 42.5%, EPS: 42.5%, reduction of CO$_{2}$ emissions 15% – i.e. unchanged from 2021. The Committee has determined to temporarily postpone target setting in light of the current heightened uncertainty as a result of the Russia-Ukraine war. The Group has significant operations in both countries. We intend to set targets as soon as possible, within six months from the standard date of grant and will fully disclose targets via RNS at that time as well as in next year's annual report. We will proceed with providing the annual award for the plan participants, including the CEO, in March 2022. Taking into account the share price volatility at the time of grant, the Remuneration Committee will retain the right to appropriately apply discretion to the share award outcome at the time of vesting, for example to safeguard against any inappropriate windfall gains. The performance period for 2022 awards will be the three years to the end of December 2024 and vesting will occur in March 2025. These vested shares will then be subject to a further two-year holding period, and the Chief Executive Officer agrees to a no-sale commitment during this time. ## Annual percentage change in remuneration of Directors and employees The following table sets out the change in remuneration for each Director for the last two years compared with the average percentage change for other employees. | Director | Salary/Year | | Taxable benefits | | Annual bonus | | | --- | --- | --- | --- | --- | --- | --- | | | 2020 to 2021 | 2019 to 2020 | 2020 to 2021 | 2019 to 2020 | 2020 to 2021 | 2019 to 2020 | | Anastasiis G. David | (3.06%) | – | – | – | – | – | | Charlotte J. Boyle | (3.06%) | – | – | – | – | – | | Henrique Braun | (3.06%) | – | – | – | – | – | | Olusola (Sola) David-Borha | (3.06%) | – | – | – | – | – | | Anna Diamantopoulou | (3.06%) | – | – | – | – | – | | William W. (Bill) Douglas III | (3.06%) | – | – | – | – | – | | Reto Francioni | (3.06%) | – | – | – | – | – | | Anastasiis I. Leventis | (3.06%) | – | – | – | – | – | | Christo Leventis | (3.06%) | – | – | – | – | – | | Alexandra Papalexopoulou | (3.06%) | – | – | – | – | – | | Bruno Pietracci | (3.06%) | – | – | – | – | – | | Jose Octavio Reyes | (3.06%) | – | – | – | – | – | | Alfredo Rivera | (3.06%) | – | – | – | – | – | | Ryan Rudolph | (3.06%) | – | – | – | – | – | ## CEO pay ratio Coca-Cola HBC is domiciled in Switzerland. We are therefore not required to report a CEO pay ratio under UK regulations; however, we are voluntarily disclosing ratios below. Similar to the section 'Annual percentage change in remuneration of Directors and employees' above, we have chosen to make a comparison with employees in Switzerland as this is the market in which our CEO is based. The international nature of our business means that we operate in countries with a significant range in terms of market practice for levels of remuneration and cost of living. Switzerland, for example, has a substantially higher cost of living and employment remuneration compared to other countries. For this reason, comparisons with our Swiss workforce are likely to be more informative about the pay distribution of our workforce. The table below compares the 2021 single figure of remuneration for the CEO with that of the employees who are paid at the 25th percentile (lower quartile), 50th percentile (median) and 75th percentile (upper quartile) of the Company's workforce based in Switzerland, ranked based on total remuneration. | Year | Method | 25^{th} percentile pay ratio (P1) | Median pay ratio (P2) | 75^{th} percentile pay ratio (P3) | | --- | --- | --- | --- | --- | | 2021 | Option A | 65.1 | 52.1 | 42.1 | | 2020 | Option A | 39.1 | 33.1 | 26.1 | | 2019 | Option A | 33.1 | 29.1 | 23.1 | 138 COCA-COLA HBC ## Directors' remuneration report *continued* Option A is based on a sample of full-time Swiss employees. Their pay and benefits is calculated, and every Swiss employee is ranked to determine P25, P50 and P75. Several Swiss employees around each percentile were identified to ensure that they accurately represent the relevant percentile ranking. The methodology used to identify the lower quartile, median and upper quartile employees was to rank all employees of the Swiss workforce on total remuneration (for employees who were in employment for the full calendar year). Two employees around each percentile were identified to ensure they accurately represent the relevant percentile ranking. The total remuneration for each of these employees was then calculated consistent with the methodology applied for deriving the CEO's single figure remuneration. The table below sets out the total pay and benefits for the lower quartile, median and upper quartile: | | 20^{th} percentile n € | Median n € | 75^{th} percentile n € | | --- | --- | --- | --- | | Annual base salary | 64,112 | 76,352 | 94,833 | | Total remuneration | 76,035 | 95,581 | 118,432 | Total remuneration of Swiss employees includes base salary, annual bonuses, other cash compensation (e.g. overtime), other cash and non-cash benefits (e.g. company car, tax support, relocation etc.), pension employer contributions and employer social security contributions during 2021. We are satisfied that the pay ratios reported this year are consistent with our wider pay, reward and progression policies for employees. As described on page 122, we have an overall remuneration philosophy that operates throughout the Group, ensuring that employees are fairly rewarded and that their individual contributions are linked to the success of the Company. Variable pay is an important element of our reward philosophy and a significant proportion of total remuneration for top managers (including the CEO) is tied to the achievement of our business objectives. As employees advance through the Company there will be the opportunity to receive higher rewards commensurate with increased accountability and market practice. The increase in the CEO pay ratio in 2021 is driven by business performance exceeding 2021 business plans impacting 2021 MIP and 2019 PSP award. The 2018 PSP award that vested in early 2021 and was included in the 2020 CEO pay ratio was capped at 50% and the 2020 MIP was applicable for half year. The CEO's total remuneration has a significantly higher proportion of variable pay in comparison with the rest of our employees. The CEO's remuneration will therefore increase or decrease in line with business performance, aligning it with shareholders' interests. ### Chief Executive Officer pay and performance comparison The graph below shows the Total Shareholder Return (TSR) of the Company compared with the FTSE 100 index over a 10-year period to 31 December 2021. The Remuneration Committee believes that the FTSE 100 Index is the most appropriate index to use for historic performance due to the size of the Company and our listing location. #### Total Shareholder Return versus FTSE 100 ![img-30.jpeg](img-30.jpeg) | | 2012 Dimitris Lois | 2013 Dimitris Lois | 2014 Dimitris Lois | 2015 Dimitris Lois | 2016 Dimitris Lois | 2017 Dimitris Lois | 2018 Zoran Bogdanovic | 2019 Zoran Bogdanovic | 2020 Zoran Bogdanovic | 2021 Zoran Bogdanovic | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Total remuneration | | | | | | | | | | | | – single figure | | | | | | | | | | | | (€ 000s) | 1,524 | 1,928 | 1,918 | 3,012 | 2,923 | 15,378 | 410 | 3,710 | 2,499 | 3,340 | | PSP (% of maximum) | 68% | 49% | 45% | 75% | 55% | 53% | 5% | 48% | 56% | 40% | | PSP (% of maximum) | – | – | – | – | – | 90% | – | 100% | 75% | 50% | Dimitris Lois sadly passed away on 2 October 2017. The 2017 total remuneration values above reflect the period 1 January 2017 to 2 October 2017. The total remuneration value for Zoran Bogdanovic reflects the period from his appointment as Chief Executive Officer to the end of the financial year, 7 December 2017 to 31 December 2017. As the Company listed on the London Stock Exchange in April 2013, the amounts included in respect of the period before that date relate to the remuneration the previous Chief Executive Officer received in his capacity as Chief Executive Officer of Coca-Cola Hellenic Bottling Company S.A. INTEGRATED ANNUAL REPORT 2021 139 # **Relative importance of spend on pay (€m)** The graphic below presents the year-on-year change in total expenditure for all employees across the Group and distributions made to shareholders in the form of dividends, share buy-backs and/or capital returns. ![img-31.jpeg](img-31.jpeg) Compared with the prior year, the total staff costs have increased by 6%, while dividends distributed to shareholders have increased by 3%. # **Shareholder voting outcomes** The table below sets out the result of the vote on the remuneration-related resolutions at the Annual General Meeting held in June 2021. | Resolution | Votes for | Votes against | Absentions | Total votes cast | Voting rights represented | | --- | --- | --- | --- | --- | --- | | Advisory vote on the UK Remuneration Report | 188,898,393 72.10% | 73,049,577 27.88% | 48,575 0.02% | 261,996,545 | 71.78% | | Advisory vote on the Swiss Remuneration Report | 189,272,983 72.24% | 72,675,321 27.74% | 48,241 0.02% | 261,996,545 | 71.78% | | Advisory vote on the remuneration policy | 250,109,133 93.54% | 17,250,378 6.43% | 76,869 0.03% | 268,330,113 | 73.70% | | Approval of the maximum aggregate amount of remuneration for the Board until the next Annual General Meeting | 267,895,965 99.87% | 347,298 0.13% | 86,850 n.a. | 268,243,263 | 73.68% | | Approval of the maximum aggregate amount of remuneration for the Executive Leadership Team for the next financial year | 265,205,431 98.98% | 1,660,130 0.62% | 1,464,552 n.a. | 266,865,561 | 73.30% | In reaction to the 72% in favor vote, the Committee decided for the first time to conduct an extensive shareholder consultation, reaching out to many shareholders and engaging with all shareholders who expressed concerns. We value our ongoing dialogue with shareholders and welcome any views on this report. # **Payments to past Directors and payments for loss of office** There were no payments made to past Directors of the Group or loss of office payments made during the year. # **Payments to appointed Directors** There were no payments made to appointed Directors during the year. # **Outside appointments for the Chief Executive Officer** Zoran Bogdanovic does not hold any appointments outside the Company. # **Total Directors' and Executive Leadership Team members' remuneration** The table below outlines the aggregated total remuneration figures for Directors and Executive Leadership Team members in the year. | | 2021 € million | 2020 € million | | --- | --- | --- | | Total remuneration paid to or accrued for Directors, the Executive Leadership Team and the Chief Executive Officer | 23.6 | 21.6 | | Salaries and other short-term benefits | 16.3 | 15.9 | | Amount accrued for performance share awards | 6.4 | 4.9 | | Pension and post-employment benefits for Directors, the Executive Leadership Team and the Chief Executive Officer | 0.9 | 0.8 | # **Credits and loans granted to governing bodies** In 2021, no credits or loans were granted to active or former members of the Company's Board, members of the Executive Leadership Team or any related persons. 140 COCA-COLA HBC ### Directors’ remuneration report continued Share ownership The table below summarises the total shareholding as at 31 December 2021, including any outstanding shares awarded through our incentive plans, for the Chief Executive Officer and other Directors. There have been no changes in the interests of any Directors in shares in the period to 16 March 2022. With performance measures Without performance measures PSP ESOP ESPP Number of outstanding | | | Performance | | Unvested and | | | Number | | Vesting | shares held | | | | | Current | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | shares | | subject to | | ofstock | | at the | | as at 31 | | | shareholding | | | Shareholding | | | | | | Share | granted in | | performance | | | options | Fully | end of | December | | Beneficially | | as % of base | | | | guideline | | | | Name | interests | | | | | | | | | | | | | | | 1 | | | | 1 | | | | | 2021 | | conditions Vested | outstanding | | vested | 2021 | | 2021 | | owned | | salary | | | | met | | 2 Zoran Bogdanovic Yes 97,206 327,430 48,829 162,477 162,477 – 47,641 193,729 722% Yes 3 Anastassis G. David – – – – – – – – – – Charlotte J. Boyle Yes – – – – – – – 1,017 – – Henrique Braun – – – – – – – – – – Olusola (Sola) David‑Borha – – – – – – – – – – Anna Diamantopoulou – – – – – – – – – – William W. (Bill) Douglas III Yes – – – – – – – 10,000 – – Reto Francioni Yes – – – – – – – 7,000 – – 4 Anastasios I. Leventis – – – – – – – – – – 5 Christo Leventis – – – – – – – – – – Alexandra Papalexopoulou – – – – – – – – – – Bruno Pietracci – – – – – – – – – – José Octavio Reyes – – – – – – – – – – Alfredo Rivera – – – – – – – – – – Ryan Rudolph – – – – – – – – – – 1. The shareholding requirement was introduced from the date of the 2015 PSP award, 10 December 2015 and has been updated to 300% in 2020. 2. Zoran Bogdanovic holds 19,113 stock options with an exercise price of £15.50 dating from the Stock Option 2010 Grant. This grant was originally due to expire on 9 December 2020. However, due to a restriction on trading in company shares, these options were not able to be exercised. The Remuneration Committee therefore agreed a temporary extension inthe expiration date of these options of 30 days after the end of the restricted period, in line with the provisions of the relevant plan rules. He exercised 43,538 options which were due to expire 2021. 3. Anastassis G. David is a beneficiary of: (a) a private discretionary trust, for the primary benefit of present and future members of the family of the late Anastasios George Leventis, that has an indirect interest with respect to 85,355,019 shares held by Kar‑Tess Holding and (b) a further private discretionary trust, for the primary benefit of present and future members of the family of the late Anastasios George Leventis, that has an indirect interest withrespect to 832,268 shares held by Ari Holdings Limited. 4. Anastasios I. Leventis is a beneficiary of: (a) a private discretionary trust, for the primary benefit of present and future members of the family of the late Anastasios George Leventis, that has an indirect interest with respect to 85,355,019 shares held by Kar‑Tess Holding and (b) a further private discretionary trust, for the primary benefit of present and future members of the family of the late Anastasios George Leventis, that has an indirect interest withrespect to 286,880 shares held by its trustee, Selene Treuhand AG and (c) a further private discretionary trust, for the primary benefit of present and future members of the family of the late Avgie Leventis, that has an indirect interest with respect to2,138,277 shares held by Carlcan Holding Limited. 5. Christo Leventis is a beneficiary of: (a) a private discretionary trust, for the primary benefit of present and future members of the family of the late Anastasios George Leventis, that has an indirect interest with respect to 85,355,019 shares held by Kar‑Tess Holding and (b) a further private discretionary trust, for the primary benefit of present and future members of the family of the late Anastasios George Leventis, that has an indirect interest withrespect to 482,228 shares held by its trustee, Selene Treuhand AG and (c) a further private discretionary trust, for the primary benefit of present and future members of the family of the late Avgie Leventis, that has an indirect interest with respect to2,138,277 shares held by Carlcan Holding Limited. Approval of the Directors’ Remuneration Report The Directors’ Remuneration Report set out on pages 118 to 140 was approved by the Board of Directors on 16 March 2022 and signed onits behalf by Charlotte J. Boyle, Chair of the Remuneration Committee. Charlotte J. Boyle Chair of the Remuneration Committee 16 March 2022 INTEGRATED ANNUAL REPORT 2021 141 ## Statement of Directors' responsibilities The Directors are responsible for preparing the Annual Report, including the consolidated Financial Statements, and the Corporate Governance Report including the Remuneration Report and the Strategic Report, in accordance with applicable law and regulations. The Directors, whose names and functions are set out on pages 88-90, confirm to the best of their knowledge that: (a) The Annual Report, taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy. (b) The consolidated Financial Statements, which have been prepared in accordance with International Financial Reporting Standards, as issued by the IASB, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation of the Group taken as a whole. (c) The Annual Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidated Coca-Cola HBC Group taken as a whole, together with a description of the principal risks and uncertainties that they face. The activities of the Group, together with the factors likely to affect its future development, performance, financial position, cash flows, liquidity position and borrowing facilities are described in the Strategic Report (pages 10 to 72). In addition, Notes 24 'Financial risk management and financial instruments', 25 'Net debt', and 26 'Equity' include: the Company's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk. The Group has considerable financial resources, together with long-term contracts with a number of customers and suppliers across different countries. The Directors have also assessed the principal risks and the other matters discussed in connection with the Viability Statement on page 72. The Directors considered it appropriate to adopt the going concern basis of accounting in preparing the annual Financial Statements and have not identified any material uncertainties to the Group's ability to continue to do so over a period of at least 12 months from the date of approval of these financial statements. By order of the Board **Anastassis G. David** Chairman of the Board March 2022 ## Disclosure of information required under Listing Rule 9.8.4R For the purposes of Listing Rule 9.8.4CR, the information required to be disclosed by premium listed companies in the United Kingdom is as follows: | Listing Rule | Information to be included | Reference in report | | --- | --- | --- | | 9.8.4(1) | Interest capitalised by the Group and an indication of the amount and treatment of any associated tax relief | Not applicable | | 9.8.4(2) | Details of any unaudited financial information required by LR 9.2.18 | Not applicable | | 9.8.4(4) | Details of any long-term incentive scheme described in LR 9.4.3 | Not applicable | | 9.8.4(5) | Details of any arrangement under which a Director has waived any emoluments | Not applicable | | 9.8.4(6) | Details of any arrangement under which a Director has agreed to waive future emoluments | Not applicable | | 9.8.4(7) | Details of any allotments of shares by the Company for cash not previously authorised by shareholders | Not applicable | | 9.8.4(8) | Details of any allotments of shares for cash by a major subsidiary of the Company | Not applicable | | 9.8.4(9) | Details of the participation by the Company in any placing made by its parent company | Not applicable | | 9.8.4(10) | Details of any contracts of significance involving a Director | Not applicable | | 9.8.4(11) | Details of any contract for the provision of services to the Company by a controlling shareholder | Not applicable | | 9.8.4(12) | Details of any arrangement under which a shareholder has waived or agreed to waive any dividends | Not applicable | | 9.8.4(13) | Details of any arrangement under which a shareholder has agreed to waive future dividends | Not applicable | | 9.8.4(14) | Agreements with a controlling shareholder | Not applicable | 142 COCA-COLA HBC ### 2021 SASB Index Majority of the information required by the Sustainability Accounting Standards Board (SASB) ## 2021 SASB framework is included in the 2021 IAR and 2021 GRI Content Index. Part of the information refers to our ## Index public website https://www.coca-colahellenic.com/ Table 1. Sustainability disclosure topics & accounting metrics Topic Accounting metric Category Unit of measure Code Response Fleet fuel consumed Gigajoules (GJ) 1,078,121 Fleet fuel | | | Quantitative | | FB‑NB‑110a.1 | | | --- | --- | --- | --- | --- | --- | | management | Percentage renewable Percentage (%) 0% | | | | | | | Operational energy consumed | | Gigajoules (GJ) | | 7,093,841 | Energy Percentage grid electricity Percentage (%) 42% Quantitative FB‑NB‑130a.1 management Percentage renewable Percentage (%) 23% Total water withdrawn Thousand cubic 26,373 metres(m³) | Total water consumed Thousand cubic | | | | 16,157 | | --- | --- | --- | --- | --- | | | Quantitative | metres(m³) | FB‑NB‑140a.1 | | | and percentage of each in | | Percentage (%) 39% | | | regions with High or Extremely Water High Baseline Water Stress management Description of water n/a 2021 IAR, Water stewardship, and Risk management risks and sections (pages 50; 58, 61‑63) discussion of strategies | | Discussion | | 2021 GRI Content Index (GRI 303: | | --- | --- | --- | --- | | andpractices to mitigate | | FB‑NB‑140a.2 | | | | andanalysis | | Waterand Effluents). | those risks CCHBC website_Sustainability section_ Water stewardship Revenue from: zero‑ EUR €1,194.3 million only from Sparkling soft andlow‑calorie drinks (SSD) portfolio, 22.7% of total SSD revenue. no added sugar beverages EUR Not reported; we report towards our UNESDA commitment for added sugar Health & Quantitative FB‑NB‑260a.1 reduction in the EU and the UK by 10% by nutrition 2025 vs. 2019: in 2021 we reduced the added sugar in our beverages by 3% vs 2019. artificially sweetened EUR CCHBC website_Sustainability section_ beverages Nutrition Not reported. | Percentage of advertising | Percentage (%) | Not reported. As a member of both the | | --- | --- | --- | | impressions (1) made on | | Coca-Cola System and UNESDA, we abide | | children and (2) made on | | by the respective responsible marketing | | children promoting products | | guidelines. In addition, we have a responsible | | that meet dietary guidelines | | marketing policy for premium spirits, while | our strategic approach towards marketing Quantitative FB‑NB‑270a.1 to children is covered by our health and wellness policy. https://www.coca‑colahellenic.com/en/ about-us/corporate-governance/policies/ Product health-wellness-policy labelling & marketing Revenue from products Reporting currency (1) None – we don’t produce/sell labelled as (1) containing GMOproducts. genetically modified Quantitative FB‑NB‑270a.2 (2) non‑GMO: €7,168.4 million organisms (GMOs) and (2) (100% of the portfolio). non-GMO CCHBC website_GMO Policy Number of incidents of Number Zero incidents of non-compliance in 2021. non-compliance with industry Quantitative FB‑NB‑270a.3 Refer to the 2021 GRI Content Index or regulatory labelling and/or (417-2 and 417-3). marketing codes 143INTEGRATED ANNUAL REPORT 2021 Coca‑Cola HBC AG 2021 IAR has been prepared in accordance with the Global Reporting Initiative (GRI) Standards, Core level. It has been independently assured by denkstatt. Independent assurance statement is on pages 242-244 of the 2021 IAR. Currently, we do not track all metrics included in the Non-Alcoholic Beverages Standards and will work towards including more data inthe future. Table 1. Sustainability disclosure topics & accounting metrics (continued) Topic Accounting metric Category Unit of measure Code Response Product Total amount of monetary Reporting currency Zero incidents of non-compliance in 2021. losses as a result of legal labelling & Refer to the 2021 GRI Content Index proceedings associated with Quantitative FB‑NB‑270a.4 (417-2 and 417-3). marketing marketing and/or labelling continued practices Total weight of packaging Metric tonnes (t) 739,321 | (2) percentage made | | Percentage (%) | 10.0 % rPET (placed on the market); | | --- | --- | --- | --- | | fromrecycled and/or | Quantitative | | 35.0% recycled glass; 50.0 % recycled | | renewable materials | | | aluminium | FB‑NB‑410a.1 Packaging (3) percentage that is Percentage (%) 99.9% lifecycle recyclable, reusable, management and/or compostable Discussion of strategies to n/a CCHBC website_Sustainability section_ reduce the environmental Discussion World without waste FB‑NB‑410a.2 impact of packaging andanalysis throughout its lifecycle | | Suppliers’ social and | Rate | 2021 GRI Content Index (205-2, | | --- | --- | --- | --- | | | environmental responsibility | | 308-1,308-2, 407-1, 408-1, 409-1, 414-1 | | Environmental | audit: non‑conformance rate | | | CCHBC website_Sustainable sourcing & social and associated corrective andOur suppliers sections action rate for (a) major and (b) impacts Quantitative FB‑NB‑430a.1 minor non-conformances CCHBC website_Sustainability section_ ofingredient Sourcing supply chain CCHBC website_Supplier Guiding Principles | Percentage of beverage | | Percentage (%) by cost | | 3.9% of supplier’s locations are in high | | --- | --- | --- | --- | --- | | ingredients sourced from | | | | water risk as per our assessment by using | | | Quantitative | | FB‑NB‑440a.1 | | | regions with High or Extremely | | | | WWF Water Risk Filter. | High Baseline Water Stress List of priority beverage n/a CCHBC website_Sustainability section_ Ingredient Sourcing ingredients and description sourcing ofsourcing risks due to 2021 GRI Content Index (102-9, 205-2, | environmental and social | Discussion | | | | --- | --- | --- | --- | | | | FB‑NB‑440a.2 | 308-1, 308-2, 407-1, 408-1, 409-1, | | considerations | and analysis | | | 414-1) CCHBC website_Sustainable sourcing andOur suppliers sections Table 2. Activity metrics Activity metric Category Unit of measure Code Response | Volume of products sold | Quantitative | Millions of hectolitres (Mhl) | FB‑NB‑000.A | 143.58 | | --- | --- | --- | --- | --- | | | | Number | | 54 production facilities produce | | Number of production facilities | Quantitative | | FB‑NB‑000.B | | non-alcoholic beverages Total fleet road miles travelled Quantitative Kilometres FB‑NB‑000.C 335,886,412 144 COCA-COLA HBC INTEGRATED ANNUAL REPORT 2021 145 # Financial statements ## Contents - 146 Independent auditor's report - **Consolidated financial statements** - 154 Consolidated income statement - 154 Consolidated statement of comprehensive income - 155 Consolidated balance sheet - 156 Consolidated statement of changes in equity - 158 Consolidated cash flow statement - **Notes to the consolidated financial statements** - **Basis of reporting** - 159 1. Description of the year - 159 2. Basis of preparation and consolidation - 160 3. Foreign currency and translation - 161 4. Accounting pronouncements - 161 8. Critical accounting estimates and judgements - **Results for the year** - 162 0. Segmental analysis - 164 7. Net sales revenue - 165 8. Operating expenses - 166 9. Finance costs, net - 166 10. Taxation - 169 11. Earnings per share - 169 12. Components of other comprehensive income - **Operating assets and liabilities** - 169 13. Intangible assets - 172 14. Property, plant and equipment - 174 16. Interests in other entities - 178 16. Leases - 180 17. Provisions - 180 18. Trade, other receivables and assets - 182 19. Assets classified as held for sale - 182 20. Trade and other royalties - 183 21. Provisions and employee benefits - 187 22. Offsetting financial assets and liabilities - 189 23. Business combinations - **Risk management and capital structure** - 189 24. Financial risk management and financial instruments - 200 25. Net debt - 204 26. Equity - **Other financial information** - 205 27. Manufacturing investments - 207 28. Share-based payments - 209 29. Contingencies - 209 30. Commitments - 209 31. Post balance sheet events 146 COCA-COLA HBC # Independent auditor's report to Coca-Cola HBC AG # Report on the audit of the consolidated financial statements # Opinion In our opinion: - Coca-Cola HBC AG's ('Coca-Cola HBC' or the 'Group') consolidated financial statements (the 'financial statements') give a true and fair view of the state of the Group's affairs as at 31 December 2021 and of its profit and cash flows for the year then ended; and - the financial statements have been properly prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union ('EU'). We have audited the financial statements, included within the 2021 Integrated Annual Report (the 'Annual Report'), which comprise: the consolidated balance sheet as at 31 December 2021, the consolidated income statement and consolidated statement of comprehensive income, the consolidated cash flow statement, and the consolidated statements of changes in equity for the year then ended, and the notes to the financial statements, which include a description of the significant accounting policies. Our opinion is consistent with our reporting to the Audit & Risk Committee. # Basis for opinion We conducted our audit in accordance with International Standards on Auditing ('ISAs'). Our responsibilities under ISAs are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. # Independence We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements, which include the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants ('IESBA Code') and the FRC's Ethical Standard, as applicable to listed public interest entities. We have fulfilled our other ethical responsibilities in accordance with these requirements. To the best of our knowledge and belief, we declare that non-audit services prohibited by the IESBA Code, the FRC's Ethical Standard and other applicable laws and regulations were not provided to the Group. Other than those disclosed in Note 8 of the financial statements, we have provided no non-audit services to the Group in the period from 1 January 2021 to 31 December 2021. # Our audit approach # Overview | **Audit scope** | - We performed full scope audit procedures on the financial information of 15 subsidiary undertakings and one joint venture in 14 countries spread across all of the Group's reportable segments. - We also conducted procedures around specific account balances and transactions and analytical review procedures for other subsidiary undertakings and Group functions. - Taken together, the undertakings which were in scope for the purpose of our audit accounted for 85% of consolidated net sales revenue, 84% of consolidated profit before tax and 87% of consolidated total assets of the Group. | | --- | --- | | **Key audit matters** | - Goodwill and indefinite-lived intangible assets impairment assessment. - Uncertain tax positions. | | **Materiality** | - Overall materiality: €36.7 million (2020: €29.6 million) based on 5% of profit before tax. - Performance materiality: €27.5 million (2020: €22.2 million) | # The scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. # Key audit matters Key audit matters are those matters that, in the auditor's professional judgement, were of most significance in the audit of the financial statements of the current year and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit. 147INTEGRATED ANNUAL REPORT 2021 Key audit matter How our audit addressed the key audit matter Goodwill and indefinite‑lived intangible assets We evaluated the appropriateness of management’s identification of impairmentassessment the Group’s CGUs, related control activities and the process by which Refer to Note 13 Intangible assets. management prepared the CGUs’ value-in-use calculations. Goodwill and indefinite-lived intangible assets as at 31 December We tested the mathematical accuracy of the CGUs’ value-in-use 2021 amount to €1,759.3 million and €269.6 million, respectively. calculations and compared the cash flow projections included therein to the financial budgets, approved by the directors, covering a The above amounts have been allocated to individual cash-generating one-year period, and management’s projections for the subsequent units (‘CGUs’), which in accordance with International Accounting four years. In addition, we evaluated the reliability of the cash flow Standard (‘IAS’) 36 require the performance of an impairment projections by comparing key elements of the prior year projections assessment at least annually or whenever there is an indication of with actual results. impairment. The impairment assessment involves the determination of the recoverable amount of the CGU, being the higher of the We challenged management’s cash flow projections in relation to the value-in-use and the fair value less costs to dispose of. assumptions applied to the value-in-use calculations focusing on future performance in light of the gradual recovery from COVID-19 This area was a key matter for our audit due to the size of goodwill global pandemic with respect to short-term and long-term revenue and indefinite-lived intangible assets balances and because the growth rates and the level of costs. determination of whether elements of goodwill and of indefinite-lived intangible assets are impaired involves complex and subjective With the support of our valuation specialists, we assessed the estimates made by management about the future results of the appropriateness of certain assumptions including discount, annual CGUs. These estimates include assumptions surrounding revenue revenue growth, perpetuity revenue growth and foreign exchange growth rates, costs, foreign exchange rates and discount rates. rates. We also evaluated management’s assessment of the potential effect of climate change to the cost of water. Furthermore, the ongoing COVID-19 pandemic, macroeconomic volatility, competitor activity and regulatory/fiscal developments We performed our independent sensitivity analyses on the key could adversely affect each CGU and potentially the carrying amount driversof the value‑in‑use calculations for the CGUs with significant of goodwill and indefinite-lived intangible assets. balances of goodwill and indefinite-lived intangible assets. Management has identified the Italy CGU to be sensitive to possible As a result of our work, we found that the determination by changes in the assumptions used, which could result in the calculated management that no impairment was required for goodwill and recoverable amount being lower in future periods than the carrying indefinite-lived intangible assets was supported by assumptions value of the CGU. Additional sensitivity disclosure has been included within reasonable ranges. in the financial statements in respect of this CGU. We assessed the appropriateness and completeness of the related No impairment charge was recorded in 2021. disclosures in Note 13, as regards to goodwill and indefinite-lived intangible assets and considered them to be reasonable. Uncertain tax positions In order to understand and evaluate management’s judgements, Refer to Note 10 Taxation and Note 29 Contingencies. weconsidered the status of current tax authority inspections andenquiries, the outcome of previous tax authority inspections, The Group operates in numerous tax jurisdictions and is subject to judgemental positions taken in tax returns and current year estimates periodic tax inspections, in the normal course of business, by local as well as recent developments in the tax jurisdictions in which the taxauthorities on a range of tax matters in relation to corporate tax, Group operates. transfer pricing and indirect taxes. As at 31 December 2021, the Group has current tax liabilities of € 80.1 million, which include We challenged management’s key assumptions, particularly in cases €52.6million of provisions for tax uncertainties. where there had been significant developments with tax authorities. The impact of changes in local tax regulations and ongoing Our component audit teams, through the use of tax specialists with inspections by local tax authorities, could materially impact the local knowledge and relevant expertise, assessed the tax positions amounts recorded in the financial statements. taken by the subsidiary undertakings in scope, in the context of applying local tax laws and evaluating the local tax assessments. Where the amount of tax payable is uncertain, the Group establishes Additionally, with our group engagement team tax specialists provisions based on management’s estimates with respect to wefurther evaluated management’s estimation of tax exposures thelikelihood of material tax exposures and the probable amount andcontingencies in order to assess the adequacy of the Group’s oftheliability. taxprovisions. We consider this area as a key audit matter given the level of We held virtual meetings with the local management to discuss judgement and uncertainty involved in estimating tax provisions theindividual tax position of the in‑scope subsidiary undertakings andthe complexities of dealing with tax rules and regulations andwith the Group engagement tax team for the Group’s overall innumerous jurisdictions. taxexposure. From the evidence obtained we consider the provisions in relation to uncertain tax positions as at 31 December 2021 to be reasonable. We also evaluated the related disclosures provided in the financial statements in Note 10 and Note 29 and concluded that these areappropriate. 148 COCA-COLA HBC ### Independent auditor’s report continued The COVID-19 global pandemic, which was a key audit matter last year, continued to be an area of focus in light of uncertainty over theeffective containment of the pandemic and any potential impact to the Group. The audit procedures performed did not identify any significant impact on the control environment, as a result of the COVID-19 global pandemic and remote working, the recoverability of trade receivables and management’s assessment of the going concern basis of accounting. Having considered the gradual recovery from the COVID-19 global pandemic and the audit effort required in 2021 and to the date of this audit report, the impact of the COVID-19 global pandemic is no longer included as a key audit matter. How we tailored the audit scope We tailored the scope of our audit to ensure that we performed sufficient work to be able to provide an opinion on the financial statements asa whole, taking into account the operating structure of the Group, the accounting processes and controls, and the industry in which the Group operates. The Group operates through its trading subsidiary undertakings in 27 European countries and in Nigeria, as set out in Notes 1 and 6 of the financial statements. The processing of the accounting records for these subsidiary undertakings is largely centralised in a shared services centre in Bulgaria, except for the subsidiary undertakings in Russia, Ukraine, Belarus, Armenia and North Macedonia, which process their accounting records locally. The Group also operates centralised treasury functions in the Netherlands and in Greece and a centralised procurement function for key raw materials in the Netherlands. Based on the significance to the financial statements and in light of the key audit matters as noted above, we identified 15 subsidiary undertakings and one joint venture in 14 countries spread across all of the Group’s reportable segments (including the significant trading subsidiary undertakings in Russia, Italy, Nigeria, Poland, Romania and Switzerland) which, based on our scoping analysis, required a full scope audit of their financial information. In addition, audit procedures were performed with respect to the centralised treasury functions by the group engagement team and with respect to the centralised procurement function by the component audit team in the Netherlands. Thegroup engagement team also performed analytical review and other procedures on balances and transactions of subsidiary undertakings not covered by the procedures described above. At the planning phase of the audit process, we held a one-day virtual audit planning workshop focusing on planning and risk assessment activities, fraud assessment, COVID-19 global pandemic considerations, auditor independence, accounting and auditing developments, including climate change, and centralised testing procedures. This audit planning workshop was attended by all audit teams, including those responsible for the Group’s subsidiary undertakings that are subject only to a statutory audit. The group engagement team was also responsible for planning, designing and overseeing the audit procedures performed at the shared services centres in Bulgaria and Greece. Inaddition, we performed work centrally on IT general controls, cybersecurity risks and the upgrade of the Group’s ERP system and shared audit comfort with the component teams while the group engagement team performed audit procedures with respect to the Group consolidation, financial statement disclosures and a number of other areas that require significant judgement and estimates, including goodwill and intangible assets and the Group’s overall going concern assessment. We issued Group audit instructions to the component audit teams setting out the work to be performed and we had an active dialogue throughout the year. Due to the travel and other restrictions put in place in response to the ongoing COVID-19 global pandemic, the group engagement team held frequent virtual meetings to oversee the work performed. In addition to holding formal periodic meetings, the group engagement team had ongoing informal interactions with the component audit teams to be continuously updated and to monitor their progress and results of their procedures. Furthermore, the group engagement team remotely reviewed component auditor working papers and undertook other forms of interaction as considered necessary, depending on the significance of the component and the extent of accounting and audit issues arising. Moreover, the group engagement team participated in the virtual meetings and discussions between thecomponent audit teams and the management of the trading subsidiary undertakings in Russia, Italy, Nigeria, Poland, Romania, Greece, and Switzerland, and the management of the joint venture in Russia, to discuss business performance and outlook, matters relating to the ongoing COVID-19 global pandemic, regulation and taxation, and any specific accounting and auditing matters identified, including fraud andinternal controls. Based on the above, the undertakings which were in scope for the purpose of our audit accounted for 85% of consolidated net sales revenue, 84% of consolidated profit before tax and 87% of consolidated total assets of the Group. This, together with the additional procedures performed at Group level, gave us appropriate audit evidence for our opinion on the financial statements. ### Materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and to evaluate the effect of misstatements, both individually and in aggregate, on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole, as follows: Overall group materiality €36.7 million (2020: €29.6 million). How we determined it 5% of profit before tax. Rationale for benchmark We chose profit before tax as the benchmark because, in our view, it is one of the principal measures applied considered by users and is a generally accepted benchmark. We chose 5% which is within the range ofacceptable quantitative materiality thresholds in generally accepted auditing practice. 149INTEGRATED ANNUAL REPORT 2021 For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range ofmateriality allocated across components was from €2.7 million to €15.0 million. We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the natureand extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Ourperformance materiality was 75% of overall materiality, amounting to €27.5 million. In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate. We agreed with the Audit & Risk Committee that we would report to them misstatements identified during our audit above €1.5 million (2020:€1.0 million) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. ### Conclusions relating to going concern Our evaluation of the directors’ assessment of the Group’s ability to continue to adopt the going concern basis of accounting included: • Verification that the cash flow projections used in the goodwill impairment, going concern and viability assessments were consistent; • Review of management’s assessment supporting the Group’s ability to continue to adopt the going concern basis of accounting, ensuring appropriate stress test scenarios were considered; • Assessment of the reasonableness of management’s assumptions used in the cash flow projections. • Testing of the mathematical integrity of the cash flow forecasts and reconciled these to the Board approved budget and management’s projections for the subsequent periods; • Evaluation of the Group’s liquidity for the period under assessment by considering the Group’s available cash resources, committed undrawn credit facilities and other debt instruments in place as well as the maturity profile of the Group’s debt. We confirmed the outstanding amounts of the financing facilities and verified their nature, terms and conditions; • Consideration whether climate change is expected to have any significant impact during the period of the going concern assessment; and • Evaluation of the appropriateness of the related disclosures provided in the financial statements in Note 2 and Note 31. Based on the work performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation ofthe financial statements is appropriate. However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s ability to continue as a going concern. In relation to the Group’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. ### Reporting on other information The other information comprises all of the information in the Annual Report other than the financial statements, our auditor’s report thereonand the Swiss statutory reporting, which we obtained prior to the date of this auditor’s report. The directors are responsible for the other information which includes reporting based on the Task Force on Climate-related Financial Disclosures (‘TCFD’) recommendations. Ouropinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If,based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities. 150 COCA-COLA HBC ### Independent auditor’s report continued ### Corporate governance statement The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the corporate governance statement relating to the Group’s compliance with the provisions of the UK Corporate Governance Code specified for our review. Our additional responsibilities with respect to the corporate governance statement as other information, are described in the Reporting onother information section of this report. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement is materially consistent with the financial statements and our knowledge obtained during the audit, and we have nothing material to add or draw attention to in relation to: • The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks; • The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and anexplanation of how these are being managed or mitigated; • The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis ofaccounting in preparing them, and their identification of any material uncertainties relating to the Group’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements; • The directors’ explanation as to their assessment of the Group’s prospects, the period this assessment covers and why the period isappropriate; and • The directors’ statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. Our review of the directors’ statement regarding the longer-term viability of the Group was substantially less in scope than an audit and only consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the financial statements and our knowledge and understanding of the Group and its environment obtained in the course of the audit. In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement is materially consistent with the financial statements and our knowledge obtained during the audit: • The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the information necessary for the members to assess the Group’s position, performance, business model and strategy; • The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and • The section of the Annual Report describing the work of the Audit & Risk Committee. We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the Group’s compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by the auditors. ### Responsibilities for the financial statements and the audit Responsibilities of the directors for the financial statements As explained more fully in the Statement of Directors’ Responsibilities in the Annual Report, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing as applicable matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below. 151INTEGRATED ANNUAL REPORT 2021 Based on our understanding of the Group and the industry in which it operates, we considered the extent to which non‑compliance with applicable laws and regulations might have a material effect on the financial statements, including, but not limited to, the corporate regulations arising from its listings on the London Stock Exchange and Athens Exchange, tax laws and regulations applicable to Coca‑Cola HBC and itssubsidiaries and regulations relating to unethical and prohibited business practices. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and where management made subjective judgements in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. The group engagement team shared this risk assessment with the component auditors so that they could include appropriate audit procedures in response to such risks in their work. Audit procedures performed by the group engagement team and/or component auditors included among others: • Discussions with management, internal audit, internal legal counsel, management’s experts and external legal advisors, where relevant, including consideration of known or suspected instances of non‑compliance with laws and regulation and fraud; • Evaluation and testing of the operating effectiveness of management’s controls designed to prevent and detect irregularities; • Assessment of matters reported on the Group’s whistleblowing helpline and the results of management’s investigation of such matters; • Reading the minutes of Board meetings to identify any inconsistencies with other information provided by management; • Challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to impairment of goodwill and indefinite‑lived intangible assets and uncertain tax positions (see related key audit matters above); • Identifying and testing journal entries, in particular any entries posted with unusual account combinations, journal entries posted by senior management and consolidation entries. There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek totarget particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw aconclusion about the population from which the sample is selected. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform auditprocedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group toexpress an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. Weremain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Those charged with governance are responsible for overseeing the Group’s financial reporting process. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that amatter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. 132 COCA-COLA HBC ## Independent auditor's report *continued* ### Use of this report This report, including the opinions, has been prepared for and only for Coca-Cola HBC AG for the purpose of the Disclosure Guidance and Transparency Rules sourcebook and the Listing Rules of the FCA and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come, save where expressly agreed by our prior consent in writing. ## Other required reporting ### Appointment We have been the Group's auditors since 2003 and following a tender process that the Group conducted in 2015, at the recommendation of the Audit & Risk Committee, we were reappointed by the directors on 11 December 2015 to audit the financial statements for the year ended 31 December 2016 and subsequent financial periods. ### Assurance Report on the European Single Electronic Format pursuant to the Athens Exchange listing requirements We have examined the digital files of Coca-Cola HBC, which were compiled in accordance with the European Single Electronic Format (ESEF) defined by the Commission Delegated Regulation (EU) 2019/815, as amended by Regulation (EU) 2020/1989 (hereinafter 'ESEF Regulation'), and which include the consolidated financial statements of the Group for the year ended 31 December 2021, in XHTML format 549300EFP3TNG7JGVE49-2021-12-31-en.xhtml, as well as the provided XBRL file 549300EFP3TNG7JGVE49-2021-12-31-en.zip with the appropriate marking up, on the aforementioned consolidated financial statements. ### Regulatory framework The digital files of the European Single Electronic Format (ESEF) are compiled in accordance with ESEF Regulation and 2020 / C 379/01 Interpretative Communication of the European Commission of 10 November 2020, as provided by the Greek Law 3556/2007 and the relevant announcements of the Hellenic Capital Market Commission and the Athens Exchange (hereinafter 'ESEF Regulatory Framework'). In summary, this Framework includes the following requirements: - All annual financial reports should be prepared in XHTML format. - For consolidated financial statements in accordance with International Financial Reporting Standards, the financial information stated in the consolidated balance sheet, the consolidated income statement and consolidated statement of comprehensive income, the consolidated cash flow statement and the consolidated statements of changes in equity should be marked-up with XBRL 'tags', according to the ESEF Taxonomy, as in force. The technical specifications for ESEF, including the relevant classification, are set out in the ESEF Regulatory Technical Standards. The requirements set out in the current ESEF Regulatory Framework are suitable criteria for formulating a reasonable assurance conclusion. ### Responsibilities of the management and those charged with governance Management is responsible for the preparation and submission of the consolidated financial statements of the Group, for the year ended 31 December 2021 in accordance with the requirements set by the ESEF Regulatory Framework, as well as for those internal controls that management identifies as necessary, to enable the compilation of digital files free of material error due to either fraud or error. ### Auditor's responsibilities Our responsibility is to plan and carry out this assurance work, in accordance with no. 214/4 / 11.02.2022 Decision of the Board of Directors of the Hellenic Accounting and Auditing Standards Oversight Board (HAASOB) and the 'Guidelines in relation to the work and the assurance report of the Certified Public Accountants on the European Single Electronic Format (ESEF) of issuers with securities listed on a regulated market in Greece' as issued by the Board of Certified Auditors on 14/02/2022 (hereinafter 'ESEF Guidelines'), providing reasonable assurance that the consolidated financial statements of the Group prepared by management in accordance with ESEF comply in all material respects with the applicable ESEF Regulatory Framework. Our work was carried out in accordance with the Code of Ethics for Professional Accountants of the International Ethics Standard Board for Accountants (IESBA Code). The assurance work we conducted is limited to the procedures provided by the ESEF Guidelines and was carried out in accordance with International Standard on Assurance Engagements 3000, 'Assurance Engagements other than Audits or Reviews of Historical Financial Information'. Reasonable assurance is a high level of assurance, but it is not a guarantee that this work will always detect a material misstatement regarding non-compliance with the requirements of the ESEF Regulation. INTEGRATED ANNUAL REPORT 2021 153 # **Conclusion** Based on the procedures performed and the evidence obtained, we conclude that the consolidated financial statements of the Group for the year ended 31 December 2021, in XHTML file format 549300EFP3TNG7JGV/49-2021-12-31-en.xhtml, as well as the provided XBRL file 549300EFP3TNG7JGV/49-2021-12-31-en.zip with the appropriate marking up, on the aforementioned consolidated financial statements have been prepared, in all material respects, in accordance with the requirements of the ESEF Regulatory Framework. # **Other matter** PwC Switzerland has reported separately on the Group and Company financial statements of Coca-Cola HBC AG for the year ended 31 December 2021 for Swiss statutory purposes. The reports are available in pages 212 and 216. **Fotis Smyrnis** the Certified Auditor, Reg. No. 52861 for and on behalf of PricewaterhouseCoopers S.A. Certified Auditors, Reg. No. 113 Athens, Greece 23 March 2022 # **Notes:** a. The maintenance and integrity of the Coca-Cola HBC AG website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. b. Legislation in the UK and Switzerland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 134 COCA-COLA HBC ## Consolidated financial statements ### Consolidated income statement For the year ended 31 December | | Note | 2021 € million | 2020 € million | | --- | --- | --- | --- | | Net sales revenue | 6.7 | 7,168.4 | 6,131.8 | | Cost of goods sold | | (4,570.2) | (3,810.3) | | **Gross profit** | | **2,598.2** | **2,321.5** | | Operating expenses | 8 | (1,833.3) | (1,682.2) | | Share of results of integral equity method investments | 15 | 34.4 | 21.4 | | **Operating profit** | 6 | **799.3** | **660.7** | | Finance income | | 5.3 | 3.8 | | Finance costs | | (72.9) | (73.9) | | **Finance costs, net** | 9 | **(67.6)** | **(70.1)** | | Share of results of non-integral equity method investments | 15 | 3.2 | 3.3 | | **Profit before tax** | | **734.9** | **593.9** | | Tax | 10 | (187.4) | (178.9) | | **Profit after tax** | | **547.5** | **415.0** | | Attributable to: | | | | | Owners of the parent | | 547.2 | 414.9 | | Non-controlling interests | | 0.3 | 0.1 | | | | **547.5** | **415.0** | | Basic earnings per share (€) | 11 | 1.50 | 1.14 | | Diluted earnings per share (€) | 11 | 1.49 | 1.14 | ### Consolidated statement of comprehensive income For the year ended 31 December | | Note | 2021 € million | 2020 € million | | --- | --- | --- | --- | | Profit after tax | | 547.5 | 415.0 | | **Other comprehensive income:** | | | | | **Items that may be subsequently reclassified to income statement:** | | | | | Cost of hedging | 24 | (2.7) | (2.2) | | Net gain on cash flow hedges | 24 | 69.5 | 22.7 | | Foreign currency translation gains/(losses) | 12 | 73.6 | (254.9) | | Share of other comprehensive income/(loss) of equity method investments | 12.15 | 14.6 | (25.4) | | Income tax relating to items that may be subsequently reclassified to income statement | 12 | (9.5) | (2.4) | | | | **145.5** | **(262.2)** | | **Items that will not be subsequently reclassified to income statement:** | | | | | Valuation loss on equity investments at fair value through other comprehensive income | | — | (0.2) | | Actuarial gains / (losses) | | 16.1 | (12.5) | | Income tax relating to items that will not be subsequently reclassified to income statement | 12 | (6.1) | 2.0 | | | | **10.0** | **(10.7)** | | **Other comprehensive income/(loss) for the year, net of tax (refer to Note 12)** | | **155.5** | **(272.9)** | | **Total comprehensive income for the year** | | **703.0** | **142.1** | | Total comprehensive income attributable to: | | | | | Owners of the parent | | 702.7 | 142.0 | | Non-controlling interests | | 0.3 | 0.1 | | | | **703.0** | **142.1** | The accompanying notes form an integral part of these consolidated financial statements. INTEGRATED ANNUAL REPORT 2021 153 ## Consolidated balance sheet As at 31 December | | Note | 2021 € million | 2020 € million | | --- | --- | --- | --- | | **Assets** | | | | | Intangible assets | 13 | **2,043.3** | 1,986.1 | | Property, plant and equipment | 14 | **2,830.9** | 2,616.6 | | Equity method investments | 15 | **365.8** | 313.7 | | Other financial assets | 24 | **16.6** | 14.0 | | Deferred tax assets | 10 | **31.0** | 35.1 | | Other non-current assets | 18 | **69.8** | 80.5 | | **Total non-current assets** | | **5,357.4** | **5,046.0** | | Inventories | 17 | **519.8** | 417.6 | | Trade, other receivables and assets | 18 | **948.6** | 773.9 | | Other financial assets | 24, 25 | **878.9** | 106.6 | | Current tax assets | | **26.7** | 13.2 | | Cash and cash equivalents | 25 | **782.8** | 1,215.8 | | | | **3,156.8** | **2,527.1** | | Assets classified as held for sale | 19 | **0.1** | – | | **Total current assets** | | **3,156.9** | **2,527.1** | | **Total assets** | | **8,514.3** | **7,573.1** | | **Liabilities** | | | | | Borrowings | 25 | **381.7** | 315.2 | | Other financial liabilities | 24 | **11.6** | 10.0 | | Trade and other payables | 20 | **1,885.8** | 1,542.8 | | Provisions and employee benefits | 21 | **157.2** | 99.6 | | Current tax liabilities | | **80.1** | 58.6 | | **Total current liabilities** | | **2,516.4** | **2,026.2** | | Borrowings | 25 | **2,555.7** | 2,610.3 | | Other financial liabilities | 24 | **3.0** | 1.3 | | Deferred tax liabilities | 10 | **197.7** | 182.5 | | Provisions and employee benefits | 21 | **118.8** | 113.3 | | Other non-current liabilities | | **5.6** | 6.2 | | **Total non-current liabilities** | | **2,880.8** | **2,913.6** | | **Total liabilities** | | **5,397.2** | **4,939.8** | | **Equity** | | | | | Share capital | 26 | **2,022.3** | 2,014.4 | | Share premium | 26 | **3,097.3** | 3,321.4 | | Group reorganisation reserve | 26 | **(6,472.1)** | (6,472.1) | | Treasury shares | 26 | **(146.6)** | (155.5) | | Exchange equalisation reserve | 26 | **(1,154.0)** | (1,242.1) | | Other reserves | 26 | **310.2** | 266.7 | | Retained earnings | | **5,457.4** | 4,897.9 | | **Equity attributable to owners of the parent** | | **3,114.5** | **2,630.7** | | Non-controlling interests | | **2.6** | 2.6 | | **Total equity** | | **3,117.1** | **2,633.3** | | **Total equity and liabilities** | | **8,514.3** | **7,573.1** | The accompanying notes form an integral part of these consolidated financial statements. 136 COCA-COLA HBC # Consolidated financial statements continued # Consolidated statement of changes in equity | | Attributable to owners of the parent | | | | | | | | Non-controlling interests € million | Total equity € million | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Share capital € million | Share premium € million | Group reorganisation reserve € million | Treasury shares € million | Exchange equalisation reserve € million | Other reserves € million | Retained earnings € million | Total € million | | | | **Balance as at 1 January 2020** | 2,010.8 | 3,545.3 | (6,472.1) | (169.8) | (964.7) | 256.3 | 4,491.7 | **2,697.5** | 2.7 | **2,700.2** | | Shares issued to employees exercising stock options | 3.6 | 4.0 | – | – | – | – | – | **7.6** | – | **7.6** | | Share-based compensation: | | | | | | | | | | | | Performance shares | – | – | – | – | – | 9.5 | – | **9.5** | – | **9.5** | | Appropriation of reserves | – | – | – | 14.3 | – | (13.9) | (0.4) | – | – | – | | Dividends | – | (227.9) | – | – | – | – | 2.2 | **(225.7)** | (0.2) | **(225.9)** | | Transfer of cash flow hedge reserve, including cost of hedging to inventories, net of tax^{1} | – | – | – | – | – | (0.2) | – | **(0.2)** | – | **(0.2)** | | | **2,014.4** | **3,321.4** | **(6,472.1)** | **(155.5)** | **(964.7)** | **251.7** | **4,493.5** | **2,488.7** | **2.5** | **2,491.2** | | Profit for the year, net of tax | – | – | – | – | – | – | 414.9 | **414.9** | 0.1 | **415.0** | | Other comprehensive loss for the year, net of tax | – | – | – | – | (277.4) | 15.0 | (10.5) | **(272.9)** | – | **(272.9)** | | Total comprehensive income for the year, net of tax^{2} | – | – | – | – | (277.4) | 15.0 | 404.4 | **142.0** | 0.1 | **142.1** | | **Balance as at 31 December 2020** | **2,014.4** | **3,321.4** | **(6,472.1)** | **(155.5)** | **(1,242.1)** | **266.7** | **4,897.9** | **2,630.7** | **2.6** | **2,633.3** | 1. The amount included in other reserves of €0.2 million gain for 2020 represents the cash flow hedge reserve, including cost of hedging, transferred to inventory of €0.1 million loss, and the deferred tax income thereof amounting to €0.3 million. 2. The amount included in the exchange equalisation reserve of €277.4 million loss for 2020 represents the exchange loss attributed to the owners of the parent, including €22.5 million loss relating to the share of other comprehensive income of equity method investments. The amount of other comprehensive income net of tax included in other reserves of €15.0 million gain for 2020 consists of loss on valuation of equity investments at fair value through other comprehensive income of €0.2 million, cash flow hedge gain of €20.5 million, share of other comprehensive income of equity method investments of €2.9 million loss and the deferred tax expense thereof amounting to €2.4 million. The amount of €404.4 million gain attributable to owners of the parent comprises profit for the year of €404.9 million plus actuarial losses of €12.5 million, minus deferred tax income of €2.0 million. The amount of €0.1 million gain included in non-controlling interests for 2020 represents the share of non-controlling interests in profit for the year. The accompanying notes form an integral part of these consolidated financial statements. INTEGRATED ANNUAL REPORT 2021 157 ## Consolidated statement of changes in equity *continued* | | Attributable to owners of the parent | | | | | | | | Non-controlling interests € million | Total equity € million | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Share capital € million | Share premium € million | Gross reorganisation reserve € million | Treasury shares € million | Exchange equalisation reserve € million | Other reserves € million | Retained earnings € million | Total € million | | | | **Balance as at 1 January 2021** | 2,014.4 | 3,321.4 | (6,472.1) | (155.5) | (1,242.1) | 266.7 | 4,897.9 | **2,630.7** | 2.6 | **2,633.3** | | Shares issued to employees exercising stock options | 7.9 | 11.7 | – | – | – | – | – | **19.6** | – | **19.6** | | Share-based compensation: | | | | | | | | | | | | Performance shares | – | – | – | – | – | 15.1 | – | **15.1** | – | **15.1** | | Movement in shares held for equity compensation plan | – | – | – | – | – | (0.1) | – | **(0.1)** | – | **(0.1)** | | Appropriation of reserves | – | – | – | 8.9 | – | (9.0) | 0.1 | – | – | – | | Dividends | – | (255.8) | – | – | – | – | 2.2 | **(233.6)** | (0.3) | **(233.9)** | | Transfer of cash flow hedge reserve, including cost of hedging to inventories, net of tax^{3} | – | – | – | – | – | (19.9) | – | **(19.9)** | – | **(19.9)** | | | **2,022.3** | **3,097.3** | **(6,472.1)** | **(146.6)** | **(1,242.1)** | **252.8** | **4,900.2** | **2,411.8** | **2.3** | **2,414.1** | | Profit for the year, net of tax | – | – | – | – | – | – | 547.2 | **547.2** | 0.3 | **547.5** | | Other comprehensive income for the year, net of tax | – | – | – | – | 88.1 | 57.4 | 10.0 | **155.5** | – | **155.5** | | Total comprehensive income for the year, net of tax^{4} | – | – | – | – | 88.1 | 57.4 | 557.2 | **702.7** | 0.3 | **703.0** | | **Balance as at 31 December 2021** | **2,022.3** | **3,097.3** | **(6,472.1)** | **(146.6)** | **(1,154.0)** | **310.2** | **5,457.4** | **3,114.5** | **2.6** | **3,117.1** | 3. The amount included in other reserves of €19.9 million gain for 2021 represents the cash flow hedge reserve, including cost of hedging, transferred to inventory of €240 million gain, and the deferred tax expense thereof amounting to €4.1 million. 4. The amount included in the exchange equalisation reserve of €88.1 million gain for 2021 represents the exchange gain attributed to the owners of the parent, primarily related to the Swiss Franc and the Russian Rouble, including €14.5 million gain relating to the share of other comprehensive income of equity method investments. The amount of other comprehensive income net of tax included in other reserves of €57.4 million gain for 2021 consists of cash flow hedges gain of €66.8 million, share of other comprehensive income of equity method investments of €0.1 million gain and the deferred tax expense thereof amounting to €9.5 million. The amount of €557.2 million gain attributable to owners of the parent comprises profit for the year of €547.2 million, actuarial gains of €16.1 million and deferred tax expense of €6.1 million. The amount of €0.3 million gain included in non-controlling interests for 2021 represents the share of non-controlling interests in profit for the year. For further details, refer to Note 24 'Financial risk management and financial instruments', Note 26 'Equity' and Note 28 'Share-based payments'. The accompanying notes form an integral part of these consolidated financial statements. 138 COCA-COLA HBC # Consolidated financial statements*continued* # Consolidated cash flow statement For the year ended 31 December | | Note | 2021 € million | 2020 € million | | --- | --- | --- | --- | | **Operating activities** | | | | | Profit after tax | | 547.5 | 419.0 | | Finance costs, net | 9 | 67.6 | 70.1 | | Share of results of non-integral equity method investments | 15 | (3.2) | (3.3) | | Tax charged to the income statement | 10 | 187.4 | 178.9 | | Depreciation of property, plant and equipment | 14 | 330.3 | 372.5 | | Impairment of property, plant and equipment | 14 | 6.0 | 15.6 | | Employee performance shares | | 14.9 | 9.5 | | Amortisation of intangible assets | 13 | 1.0 | 0.9 | | | | **1,151.5** | **1,059.2** | | Share of results of integral equity method investments | 15 | (34.4) | (21.4) | | Gain on disposals of non-current assets | 8 | (28.4) | (1.4) | | (Increase)/decrease in inventories | | (114.5) | 9.4 | | (Increase)/decrease in trade and other receivables | | (109.0) | 178.5 | | Increase/(decrease) in trade and other payables | | 419.3 | (79.6) | | Tax paid | | (142.3) | (183.2) | | **Net cash inflow from operating activities** | | **1,142.2** | **961.5** | | **Investing activities** | | | | | Payments for purchases of property, plant and equipment | | (506.5) | (419.2) | | Proceeds from sales of property, plant and equipment | | 35.8 | 13.4 | | Payments for business combinations | 23 | (5.6) | — | | Payment for acquisition of joint operation | | (0.9) | — | | Net payment for acquisition of integral equity method investment | 15 | — | (0.5) | | Net receipts from integral equity method investments | 27 | 47.8 | 27.1 | | Payments for acquisition of non-integral equity method investments | 15 | (87.0) | (2.4) | | Net receipts from non-integral equity method investments | 27 | 1.9 | 1.3 | | Joint arrangement reclassification | 15 | — | (13.1) | | Net (payments for)/proceeds from investments in financial assets at amortised cost | | (102.8) | 264.4 | | Net (payments for)/proceeds from investments in financial assets at fair value through profit or loss | | (640.6) | 370.4 | | Loans to related parties | | (0.9) | (2.5) | | Interest (paid)/received | | (0.3) | 0.2 | | **Net cash (outflow)/inflow from investing activities** | | **(1,259.1)** | **239.1** | | **Financing activities** | | | | | Proceeds from shares issued to employees exercising stock options | 26 | 19.6 | 7.6 | | Proceeds from borrowings | | 129.3 | 211.8 | | Repayments of borrowings | | (133.8) | (655.8) | | Principal repayments of lease obligations | | (63.1) | (58.7) | | Dividends paid to owners of the parent | 26 | (233.6) | (225.7) | | Dividends paid to non-controlling interests | | (0.2) | (0.2) | | Proceeds from/(payments for) settlement of derivatives regarding financing activities | | 4.9 | (1.1) | | Interest paid | | (45.5) | (64.7) | | **Net cash outflow from financing activities** | | **(322.4)** | **(786.8)** | | **Net (decrease)/increase in cash and cash equivalents** | | **(439.3)** | **413.8** | | **Movement in cash and cash equivalents** | | | | | Cash and cash equivalents at 1 January | | 1,215.8 | 823.0 | | Net (decrease)/increase in cash and cash equivalents (2020: Net increase in cash and cash equivalents, excl. joint arrangement reclassification) | | (439.3) | 426.9 | | Joint arrangement reclassification | 15 | — | (13.1) | | Effect of changes in exchange rates | | 6.3 | (21.0) | | **Cash and cash equivalents at 31 December** | 25 | **782.8** | **1,215.8** | The accompanying notes form an integral part of these consolidated financial statements. INTEGRATED ANNUAL REPORT 2021 159 # Notes to the consolidated financial statements ## 1. Description of business Coca-Cola HBC AG and its subsidiaries (the 'Group' or 'Coca-Cola HBC' or 'the Company') are principally engaged in the production, sales and distribution of primarily non-alcoholic ready-to-drink beverages, under franchise from The Coca-Cola Company. The Company distributes its products in Nigeria and 27 countries in Europe. Information on the Company's operations by segment is included in Note 6. On 11 October 2012, Coca-Cola HBC, a Swiss stock corporation (Aktiengesellschaft/Société Anonyme) incorporated by Kar-Tess Holding (a related party of the Group, refer to Note 27), announced a voluntary share exchange offer to acquire all outstanding ordinary registered shares and all American depositary shares of Coca-Cola Hellenic Bottling Company S.A. As a result of the successful completion of this offer, on 26 April 2013, Coca-Cola HBC acquired 96.85% of the issued Coca-Cola Hellenic Bottling Company S.A. shares, including shares represented by American depositary shares, and became the new parent company of the Group. On 17 June 2013, Coca-Cola HBC completed its statutory buy-out of the remaining shares of Coca-Cola Hellenic Bottling Company S.A. that it did not acquire upon completion of its voluntary share exchange offer. Consequently, Coca-Cola HBC acquired 100% of Coca-Cola Hellenic Bottling Company S.A. which was eventually delisted from the Athens Exchange, from the London Stock Exchange where it had a secondary listing and from the New York Stock Exchange where American depositary shares were listed. The shares of Coca-Cola HBC started trading in the premium segment of the London Stock Exchange (Ticker symbol: CCH) and on the Athens Exchange (Ticker symbol: EEE) and regular way trading in Coca-Cola HBC American depositary shares commenced on the New York Stock Exchange (Ticker symbol: CCH) on 29 April 2013. On 24 July 2014, the Group proceeded to the delisting of its American depositary shares from the New York Stock Exchange and terminated its reporting obligations under the US Securities Exchange Act of 1934. The deregistration of Coca-Cola HBC shares under the US Securities Exchange Act of 1934 and the termination of its reporting obligations became effective on 3 November 2014. ## 2. Basis of preparation and consolidation ### Basis of preparation The consolidated financial statements of the Group for the year ended 31 December 2021 have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union ('EU') and in compliance with Swiss law. The consolidated financial statements of the Group for the year ended 31 December 2020 were prepared in accordance with IFRS as issued by the International Accounting Standards Board (IASB) and in compliance with Swiss law. IFRS as adopted by the EU differ in certain respects from IFRS as issued by the IASB. These differences have no impact on the Group's consolidated financial statements for the periods presented. These consolidated financial statements were approved for issue by the Board of Directors on 22 March 2022 and are expected to be verified at the Annual General Meeting to be held on 21 June 2022. ### Going concern In 2021, the Group experienced a gradual recovery from the COVID-19 pandemic as evidenced by the reopening of its markets and return to pre-pandemic levels of performance. However, COVID-19 continues to be a source of uncertainty for the near term and could potentially lead to further economic disruption. As part of the consideration of whether to adopt the going concern basis in preparing the consolidated financial statements, management has reviewed a range of scenarios and forecasts as part of its continuous focus on risk management, including the potential financial impact of a slower COVID-19 pandemic recovery, along with the Group's proposed responses. The relevant assumptions have been modelled on the estimated potential impact of severe but plausible downside scenarios, linked to the Group's principal risks. The Group's strong balance sheet and liquidity position, its leading market shares and largely variable cost base, together with its unique portfolio of brands and resilient and talented people will, management believe, allow the Group to fully overcome the challenges posed by the ongoing COVID-19 pandemic. In addition, management considered the potential effect of climate change-related risks to the cost of water and concluded that there is no impact over the period of assessment. Having considered the outcome of these assessments, based on a quantitative viability exercise, it is deemed appropriate that the Group continues to adopt the going concern basis for the preparation of the consolidated financial statements under the historical cost convention, as modified by the revaluation of financial assets at fair value through profit or loss, investments in equity instruments classified at fair value through other comprehensive income and derivative financial instruments. ### Change in accounting estimate In the current financial year, the Group has applied a change in the estimate of useful lives applicable to certain categories of production equipment, included within the plant and equipment asset category (Note 14). As a result, effective 1 January 2021, the expected useful life of the specific categories of production equipment was extended by five years. The change was driven by the reassessment of the expected period of usage and has resulted in an approximately €33 million decrease in the depreciation expense in the current year. This is primarily reflected in the 'Cost of goods sold' line of the consolidated income statement. 140 COCA-COLA HBC ## Notes to the consolidated financial statements *continued* ### 2. Basis of preparation and consolidation *continued* #### Basis of consolidation Subsidiary undertakings are those companies over which the Group, directly or indirectly, has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through power over the entity. Subsidiary undertakings are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Inter-company transactions and balances between Group companies are eliminated. The subsidiaries' accounting policies are consistent with policies adopted by the Group. When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value at the date when such control is lost, with the change in carrying amount recognised in the income statement. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This means that amounts previously recognised in other comprehensive income, if any, are reclassified to the income statement. ### 3. Foreign currency and translation The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Euro, which is the presentation currency for the consolidated financial statements. The assets and liabilities of foreign subsidiaries are translated into Euro at the exchange rate prevailing at the balance sheet date. The results of foreign subsidiaries are translated into Euro using the average monthly exchange rate (being a reasonable approximation of the rates prevailing on the transaction dates). The exchange differences arising on translation are recognised in other comprehensive income. On disposal of a foreign entity, accumulated exchange differences are recognised as a component of the gain or loss on disposal. Transactions in foreign currencies are recorded at the rate ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are remeasured at the rate of exchange ruling at the balance sheet date. All gains and losses arising on remeasurement are included in the income statement, except for exchange differences arising on assets and liabilities classified as cash flow hedges, which are deferred in equity until the occurrence of the hedged transaction, at which time they are recognised in the income statement. Share capital denominated in a currency other than the functional currency is initially stated at the spot rate on the date of issue but is not retranslated. The principal exchange rates used for translation purposes in respect of one Euro are: | | Average 2021 | Average 2020 | Closing 2021 | Closing 2020 | | --- | --- | --- | --- | --- | | US Dollar | 1.18 | 1.14 | 1.13 | 1.22 | | UK Sterling | 0.86 | 0.89 | 0.84 | 0.91 | | Polish Zloty | 4.56 | 4.44 | 4.60 | 4.54 | | Nigerian Naira | 484.31 | 435.06 | 481.32 | 480.68 | | Hungarian Forint | 358.49 | 350.65 | 370.08 | 364.83 | | Swiss Franc | 1.08 | 1.07 | 1.04 | 1.08 | | Russian Rouble | 87.23 | 82.23 | 83.87 | 90.55 | | Romanian Leu | 4.92 | 4.84 | 4.95 | 4.88 | | Ukrainian Hryvnia | 32.30 | 30.66 | 30.78 | 34.64 | | Czech Koruna | 25.64 | 26.45 | 24.95 | 26.21 | | Serbian Dinar | 117.57 | 117.58 | 117.56 | 117.57 | 161INTEGRATED ANNUAL REPORT 2021 ### 4. Accounting pronouncements a) Accounting pronouncements adopted in 2021 The Group has adopted the following amendments which were endorsed by the EU that are relevant to its operations and effective for accounting periods beginning 1 January 2021: • Interest Rate Benchmark Reform – Phase 2 – Amendments to IFRS 9, IAS 39, IFRS 7 and IFRS 16; and • COVID-19 – Related Rent Concessions – Amendments to IFRS 16. The adoption of these amendments did not have a significant impact on the consolidated financial statements of the Group. b) Accounting pronouncements not yet adopted At the date of approval of these consolidated financial statements, the following amendments relevant to the Group’s operations were issued but not yet effective and not early‑adopted: • Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16; • Onerous Contracts – Cost of Fulfilling a Contract – Amendments to IAS 37; • Reference to the Conceptual Framework – Amendments to IFRS 3; • Annual Improvements to IFRS Standards 2018‑2020; • COVID‑19‑Related Rent Concessions beyond 30 June 2021 – Amendments to IFRS 16; • Classification of Liabilities as Current or Non‑current – Amendments to IAS 1 (not endorsed by the EU); • Disclosure of Accounting Policies – Amendments to IAS 1 (not endorsed by the EU); • Definition of Accounting Estimates – Amendments to IAS 8 (not endorsed by the EU); and • Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12 (not endorsed by the EU). The above amendments are not expected to have a material impact on the consolidated financial statements of the Group. ### 5. Critical accounting estimates and judgements In conformity with IFRS, the preparation of the consolidated financial statements for Coca‑Cola HBC requires management to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities in the consolidated financial statements and accompanying notes. Although these estimates and judgements are basedon management’s knowledge of current events and actions that may be undertaken in the future, actual results may ultimately differ fromestimates. Estimates The key items concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk ofcausing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below: • Income taxes (refer to Note 10); • Impairment of goodwill and indefinite‑lived intangible assets (refer to Note 13); and • Employee benefits – defined benefit pension plans (refer to Note 21). Judgements In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations as described above, which have the most significant effect on the amounts recognised in the consolidated financial statements: • Joint arrangements (refer to Note 15). 162 COCA-COLA HBC ### Notes to the consolidated financial statements continued ### 6. Segmental analysis The Group has essentially one business, being the production, sale and distribution of ready-to-drink, primarily non-alcoholic, beverages. The Group operates in 28 countries, which are aggregated into reportable segments as follows: Established markets Austria, Cyprus, Greece, Italy, Northern Ireland, the Republic of Ireland and Switzerland. Developing markets Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia. Emerging markets Armenia, Belarus, Bosnia and Herzegovina, Bulgaria, Moldova, Montenegro, Nigeria, North Macedonia, Romania, the Russian Federation, Serbia (including the Republic of Kosovo) andUkraine. The Group’s operations in each of the three reportable segments have been aggregated on the basis of their similar economic characteristics, assessed by reference to their net sales revenue per unit case as well as disposable income per capita, exposure to political and economic volatility, regulatory environments, customers and distribution infrastructures. The accounting policies of the reportable segments are thesame as those adopted by the Group. The Group’s chief operating decision‑maker is its Executive Leadership Team, which evaluates performance and allocates resources based on volume, net sales revenue and operating profit. a) Volume and net sales revenue 1 The Group sales volume in million unit cases for the years ended 31 December was as follows: 2021 2020 Established 589.9 536.9 Developing 415.5 412.1 Emerging 1,407.3 1,186.6 Total volume 2,412.7 2,135.6 1. One unit case corresponds to approximately 5.678 litres or 24 servings, being a typically used measure of volume. For biscuits volume, one unit case corresponds to 1 kilogram. Volume data is derived from unaudited operational data. Net sales revenue per reportable segment for the years ended 31 December is presented in the graphs below: 2021 2020 ## €7,168.4 million €6,131.8 million | Established | €2,479.0m | Established | €2,174.6m | | --- | --- | --- | --- | | Developing | €1,365.6m | Developing | €1,170.9m | | Emerging | €3,323.8m | Emerging | €2,786.3m | Sales or transfers between the Group’s segments are not material, nor are there any customers who represent more than 10% of net sales revenue for the Group. INTEGRATED ANNUAL REPORT 2021 163 In addition to non-alcoholic, ready-to-drink beverages ('NARTD'), the Group sells and distributes premium spirits. An analysis of volume and net sales revenue per product type for the years ended 31 December is presented below: | Volume in million unit cases^{1} | 2021 | 2020 | | --- | --- | --- | | NARTD^{2} | 2,409.3 | 2,133.2 | | Premium spirits | 3.4 | 2.4 | | **Total volume** | **2,412.7** | **2,135.6** | | Net sales revenue in € million: | | | | NARTD | 6,944.5 | 5,974.4 | | Premium spirits | 223.9 | 157.4 | | **Total net sales revenue** | **7,168.4** | **6,131.8** | 1. One unit case corresponds to approximately 5.678 litres or 24 servings, being a typically used measure of volume. For premium spirits volume, one unit case also corresponds to 5.678 litres. For biscuits volume, one unit case corresponds to 1 kilogram. Volume data is derived from unaudited operational data. 2. NARTD non-alcoholic, ready-to-drink beverages. Net sales revenue from external customers attributed to Switzerland (the Group's country of domicile), Russia, Italy and Nigeria was as follows for the years ended 31 December: | | 2021 € million | 2020 € million | | --- | --- | --- | | Switzerland | 354.3 | 368.0 | | Russia | 953.3 | 773.3 | | Italy | 901.6 | 751.5 | | Nigeria | 702.0 | 509.0 | | All countries other than Switzerland, Russia, Italy and Nigeria | 4,257.2 | 3,730.0 | | **Total net sales revenue from external customers** | **7,168.4** | **6,131.8** | ### b) Other income statement items | Year ended 31 December | Note | 2021 € million | 2020 € million | | --- | --- | --- | --- | | Operating profit: | | | | | Established | | 285.6 | 203.3 | | Developing | | 104.7 | 97.0 | | Emerging | | 409.0 | 360.4 | | **Total operating profit** | | **799.3** | **660.7** | | Finance costs: | | | | | Established | | (17.7) | (21.5) | | Developing | | (7.9) | (5.7) | | Emerging | | (15.0) | (13.2) | | Corporate^{3} | | (120.1) | (138.0) | | Inter-segment finance cost | | 87.8 | 104.5 | | **Total finance costs** | 9 | **(72.9)** | **(73.9)** | | Finance income: | | | | | Established | | 1.2 | 1.1 | | Developing | | 0.5 | 0.7 | | Emerging | | 9.7 | 10.1 | | Corporate^{3} | | 81.7 | 96.4 | | Inter-segment finance income | | (87.8) | (104.5) | | **Total finance income** | 9 | **5.3** | **3.8** | | Income tax expense: | | | | | Established | | (57.6) | (41.8) | | Developing | | (10.6) | (28.7) | | Emerging | | (91.1) | (89.0) | | Corporate^{3} | | (28.1) | (19.4) | | **Total income tax expense** | 10 | **(187.4)** | **(178.9)** | | Reconciling items: | | | | | Share of results of non-integral equity method investments | 15 | 3.2 | 3.3 | | **Profit after tax** | | **547.5** | **415.0** | 3. Corporate refers to holding, finance and other non-operating subsidiaries of the Group. 144 COCA-COLA HBC ## Notes to the consolidated financial statements *continued* ### 6. Segmental analysis *continued* Depreciation and impairment of property, plant and equipment and amortisation of intangible assets included in the measure of operating profit are as follows: | Year ended 31 December | Note | 2021 € million | 2020 € million | | --- | --- | --- | --- | | Depreciation and impairment of property, plant and equipment: | | | | | Established | | (92.1) | (109.6) | | Developing | | (54.1) | (66.4) | | Emerging | | (190.1) | (212.1) | | **Total depreciation and impairment of property, plant and equipment** | 1.4 | **(336.3)** | **(388.1)** | | Amortisation of intangible assets: | | | | | Developing | | (0.3) | (0.2) | | Emerging | | (0.7) | (0.7) | | **Total amortisation of intangible assets** | 1.3 | **(1.0)** | **(0.9)** | #### c) Other items The balance of non-current assets$^{4}$ attributed to Switzerland (the Group's country of domicile), Russia, Italy and Nigeria was as follows for the years ended 31 December: | | 2021 € million | 2020 € million | | --- | --- | --- | | Switzerland | 557.5 | 540.0 | | Russia^{5} | 330.2 | 307.4 | | Italy | 1,082.3 | 1,108.8 | | Nigeria | 642.1 | 553.3 | | All countries other than Switzerland, Russia, Italy and Nigeria | 2,654.6 | 2,465.0 | | **Total non-current assets^{4}** | **5,266.7** | **4,974.5** | 4. Excluding other financial assets, deferred tax assets, pension plan assets and trade and loans receivable. 5. Excluding the investment in Multon, the Group's Russian juice business (refer to Note 15). Expenditure on property, plant and equipment per reportable segment was as follows for the years ended 31 December: | | 2021 € million | 2020 € million | | --- | --- | --- | | Established | 104.7 | 108.2 | | Developing | 89.5 | 69.3 | | Emerging^{6} | 319.4 | 241.7 | | **Total expenditure on property, plant and equipment** | **513.6** | **419.2** | 6. Expenditure on property, plant and equipment for 2021 includes €7.1 million (2020: €6.9) relating to repayment of borrowings undertaken to finance the purchase of production equipment by the Group's subsidiary in Nigeria, classified as 'Repayment of borrowings' in the consolidated cash flow statement. ### 7. Net sales revenue #### Accounting policy The Group essentially produces, sells and distributes ready-to-drink, primarily non-alcoholic, beverages. Under IFRS 15 'Revenue from contracts with customers' the Group recognises revenue when control of the products is transferred, being when the products are delivered to the customer. Net sales revenue is measured at the fair value of the consideration received or receivable and is stated net of sales discounts and consideration paid to customers. These mainly take the form of promotional incentives and are amortised over the terms of the related contracts as a deduction in revenue. The Group provides volume rebates to customers once the quantity of goods purchased during the period exceeds a threshold specified in the contract. To estimate the variable consideration for the expected future rebates, the Group uses the most likely amount method and the amount is recognised in sales revenue only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur when the uncertainty associated with the variable consideration is subsequently resolved. A contract liability is recognised if a payment is received or a payment is due (whichever is earlier) from a customer before the Group transfers the related goods. Contract liabilities are recognised as revenue when the Group performs under the contract (i.e. transfers control of the related goods to the customer). Net sales revenue includes excise and other duties where the Group acts as a principal but excludes amounts collected by third parties such as value-added taxes as these are not included in the transaction price. The Group assesses these taxes and duties on a jurisdiction-by-jurisdiction basis to decide on the appropriate accounting treatment. Coca-Cola HBC receives contributions from The Coca-Cola Company in order to promote sales of its brands. Contributions for price support, marketing and promotional campaigns in respect of specific customers are recognised as an offset to promotional incentives provided to those customers to which the contributions contractually relate. These contributions are accrued and matched to the expenditure to which they relate (refer to Note 27). Revenue recognised in 2021 that was included in the contract liability balance at the beginning of the year amounted to €10.4 million (2020: €6.9 million). Refer to Note 20 for contract liabilities as at 31 December 2021 and 2020. Refer to Note 6 for an analysis of net sales revenue per reportable segment. 165INTEGRATED ANNUAL REPORT 2021 ### 8. Operating expenses Operating expenses for the year ended 31 December comprised: 2021 2020 € million € million Selling expenses 879.1 799.7 Delivery expenses 533.0 484.3 Administrative expenses 385.7 388.4 Restructuring expenses 21.2 9.8 Acquisition and integration costs (refer to Note 23) 14.3 – Operating expenses 1,833.3 1,682.2 In 2021, operating expenses included net gain on disposals of non‑current assets of €28.4 million (2020: €1.4 million net gain). a) Restructuring expenses Accounting policy Restructuring expenses are recorded in a separate line item within operating expenses and comprise costs arising from significant changes in the way the Group conducts its business such as significant supply chain infrastructure changes, outsourcing of activities and centralisation of processes. Restructuring provisions are recognised only when the Group has a present constructive obligation, which iswhen a detailed formal plan identifies the business or part of the business concerned, the location, function and number of employees affected, a detailed estimate of the associated costs, as well as an appropriate timeline and the employees affected have been notified ofthe plan’s main features. As part of the effort to optimise its cost base and sustain competitiveness in the marketplace, the Company undertakes restructuring initiatives. The restructuring concerns mainly employees’ termination benefits. Restructuring expenses per reportable segment for the years ended 31 December are presented below: 2021 2020 ## €21.2 million €9.8 million | Established | €14.7m | Established | €5.5m | | --- | --- | --- | --- | | Developing | €3.4m | Developing | €4.0m | | Emerging | €3.1m | Emerging | €0.3m | b) Employee costs Employee costs for the years ended 31 December comprised: 2021 2020 € million € million Wages and salaries 724.7 681.8 Social security costs 138.3 137.9 Pension and other employee benefits 132.3 116.8 Termination benefits 19.9 19.3 Total employee costs 1,015.2 955.8 The average number of full‑time equivalent employees in 2021 was 26,787 (2020: 27,722). Employee costs for 2021 included in operating expenses and cost of goods sold amounted to €766.7 million and €248.5 million respectively (2020: €720.5 million and €235.3 million respectively). c) Directors’ and senior management remuneration The total remuneration paid or accrued for Directors and the senior management team for the years ended 31 December comprised: 2021 2020 € million € million Salaries and other short-term benefits 16.3 15.9 Performance share awards 6.4 4.9 Pension and post-employment benefits 0.9 0.8 Total remuneration 23.6 21.6 146 COCA-COLA HBC ## Notes to the consolidated financial statements *continued* ### 8. Operating expenses *continued* #### d) Fees and other services of the auditor Audit and other fees charged in the income statement concerning the auditor of the consolidated financial statements. PricewaterhouseCoopers S.A. and affiliates, were as follows, for the years ended 31 December: | | 2021 € million | 2020 € million | | --- | --- | --- | | Audit fees | 4.8 | 4.5 | | Audit-related fees | 0.7 | 0.6 | | **Total audit and audit-related fees** | **5.5** | **5.1** | ### 9. Finance costs, net #### Accounting policy Interest income and interest expense are recognised using the effective interest rate method, and are recorded in the income statement within 'Finance income' and 'Finance cost' respectively. Interest expense includes finance charges with respect to leases. Interest expense also includes amortisation of the loss on the forward starting swaps and the net impact from swaptions recorded in other comprehensive income (refer to Note 24). Finance costs, net, for the years ended 31 December comprised: | | 2021 € million | 2020 € million | | --- | --- | --- | | **Interest income** | **5.3** | **3.8** | | Interest expense | (67.1) | (71.8) | | Other finance costs | (1.7) | (1.8) | | Net foreign exchange remeasurement losses | (4.1) | (0.3) | | **Finance costs** | **(72.9)** | **(73.9)** | | **Finance costs, net** | **(67.6)** | **(70.1)** | Other finance costs include commitment fees on loan facilities (for the part not yet drawn down) and other similar fees. For the interest expense incurred with respect to leases, refer to Note 16. ### 10. Taxation #### Accounting policy Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or in equity. In this case, the tax is recognised in other comprehensive income or directly in equity. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Group operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate, on the basis of amounts expected to be paid to the tax authorities. Deferred tax is provided using the liability method for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. However, the deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Tax rates enacted or substantively enacted at the balance sheet date are those that are expected to apply when the deferred tax asset is realised or deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax assets are recognised for tax losses carried forward to the extent that realisation of the related tax benefit through the reduction of future taxes is probable. Deferred tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference can be controlled by the Group, and it is probable that the temporary difference will not reverse in the foreseeable future. This includes taxation in respect of the retained earnings of overseas subsidiaries only to the extent that, at the balance sheet date, dividends have been accrued as receivable or a binding agreement to distribute past earnings in future periods has been entered into by the subsidiary. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to offset current tax assets against current income tax liabilities and the deferred taxes relate to the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. #### Critical accounting estimates The Group is subject to income taxes in numerous jurisdictions. There are many transactions and calculations for which the ultimate tax determination cannot be assessed with certainty in the ordinary course of business. The Group recognises a provision for potential cases that might arise in the foreseeable future, based on assessment of the probabilities as to whether additional taxes will be due. Where the final tax outcome on these matters is different from the amounts that were initially recorded, such differences will impact the income tax provision in the period in which such determination is made. The income tax provision amounted to €52.6 million as at 31 December 2021 (2020: €37.2 million) and is included in the line 'Current tax liabilities' of the consolidated balance sheet. INTEGRATED ANNUAL REPORT 2021 167 The income tax charge for the years ended 31 December was as follows: | | 2021 € million | 2020 € million | | --- | --- | --- | | Current tax expense | 183.5 | 111.5 | | Deferred tax expense | 3.9 | 67.4 | | **Income tax expense** | **187.4** | **178.9** | The tax on the Group's profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows: | | 2021 € million | 2020 € million | | --- | --- | --- | | Profit before tax | 734.9 | 593.9 | | Tax calculated at domestic tax rates applicable to profits in the respective countries | 155.7 | 119.8 | | Additional local taxes in foreign jurisdictions | 13.0 | 10.3 | | Tax holidays in foreign jurisdictions | (5.8) | (6.1) | | Expenses non-deductible for tax purposes | 17.5 | 14.5 | | Income not subject to tax | (2.5) | (6.9) | | Changes in tax laws and rates | 3.1 | (0.4) | | Movement of accumulated tax losses | 3.2 | 3.3 | | Movement of deferred tax asset not recognised | (0.6) | (0.2) | | Nigeria tax audit settlement | — | 16.5 | | Other | 3.8 | 28.1 | | **Income tax expense** | **187.4** | **178.9** | Non-deductible expenses for tax purposes include marketing and advertising expenses, service fees, bad debt provisions, entertainment expenses, certain employee benefits and other items that, partially or in full, are not deductible for tax purposes in certain of our jurisdictions. In August 2020, Nigerian Bottling Company Ltd ('NBC'), the Group's subsidiary in Nigeria, settled the additional tax assessed by the Nigerian tax authorities ('FIRS') following the completion of their income tax audit for the years 2005-2019 and their transfer pricing ('TP') audit for the years 2011-2019. The net impact to the income tax expense, following the utilisation of provisions for uncertain tax positions, was €16.5 million, out of which €7.2 million was attributable to the results of the TP audit. As a result of the TP audit, the FIRS adjusted NBC's profitability, increasing its taxable base accordingly. This increase of NBC's taxable base resulted in the elimination of accumulated capital allowances and to the extent these were not sufficient to offset the full impact of the tax adjustment in a certain year, a tax payment was required to be made. Following the settlement, the total tax assessed by the FIRS amounted to €62.7 million, of which €7.6 million was settled in cash and the remaining €55.1 million was settled through the elimination of the deferred tax asset relating to the available capital allowances in NBC. Deferred tax assets and liabilities presented in the consolidated balance sheet as at 31 December can be further analysed as follows: | | 2021 € million | 2020 € million | | --- | --- | --- | | Deferred tax assets: | | | | To be recovered after 12 months | 32.9 | 34.4 | | To be recovered within 12 months | 71.5 | 67.8 | | **Gross deferred tax assets** | **104.4** | **102.2** | | Offset of deferred tax | (73.4) | (67.1) | | **Net deferred tax assets** | **31.0** | **35.1** | | Deferred tax liabilities: | | | | To be recovered after 12 months | (255.0) | (237.6) | | To be recovered within 12 months | (16.1) | (12.0) | | **Gross deferred tax liabilities** | **(271.1)** | **(249.6)** | | Offset of deferred tax | 73.4 | 67.1 | | **Net deferred tax liabilities** | **(197.7)** | **(182.5)** | A reconciliation of net deferred tax is presented below: | | 2021 € million | 2020 € million | | --- | --- | --- | | As at 1 January | (147.4) | (95.0) | | Taken to the income statement | (3.9) | (67.4) | | Joint arrangement reclassification | — | 3.7 | | Taken to other comprehensive income | (15.6) | (0.4) | | Taken directly to equity | 4.1 | (0.3) | | Foreign currency translation | (3.9) | 12.0 | | **As at 31 December** | **(166.7)** | **(147.4)** | 148 COCA-COLA HBC # Notes to the consolidated financial statements *continued* ## 10. Taxation *continued* The movements in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction where applicable, are as follows: | Deferred tax assets | Provisions € million | Pensions and benefit plans € million | Tax losses carry-forward € million | Basis in essays of tax depreciation € million | Leasing € million | Other deferred tax assets € million | Total € million | | --- | --- | --- | --- | --- | --- | --- | --- | | As at 1 January 2020 | 41.2 | 17.7 | 1.4 | 14.9 | 29.0 | 28.6 | 132.8 | | Joint arrangement reclassification (refer to Note 15) | (0.1) | (0.2) | – | – | – | – | (0.3) | | Taken to the income statement | (8.6) | (1.0) | 0.5 | (64.7) | (1.5) | (2.6) | (77.9) | | Taken to other comprehensive income | – | 1.3 | – | – | – | (0.7) | 0.6 | | Taken directly to equity | – | – | – | – | – | (0.3) | (0.3) | | Transfers between assets/liabilities | – | (1.6) | – | 56.7 | – | (0.3) | 54.8 | | Foreign currency translation | (4.1) | (0.1) | – | (1.2) | (1.0) | (1.1) | (7.5) | | **As at 31 December 2020** | **28.4** | **16.1** | **1.9** | **5.7** | **26.5** | **23.6** | **102.2** | | Taken to the income statement | 4.4 | (5.5) | (0.1) | (0.6) | (2.8) | 7.4 | 2.8 | | Taken to other comprehensive income | – | 0.6 | – | – | – | (0.5) | 0.1 | | Transfers between assets/liabilities | – | – | – | (1.7) | – | – | (1.7) | | Foreign currency translation | 0.7 | 0.1 | – | – | 0.1 | 0.1 | 1.0 | | **As at 31 December 2021** | **33.5** | **11.3** | **1.8** | **3.4** | **23.8** | **30.6** | **104.4** | | Deferred tax liabilities | Tax in excess of book depreciation € million | Derivative instruments € million | Other deferred tax liabilities € million | Total € million | | --- | --- | --- | --- | --- | | As at 1 January 2020 | (206.3) | (1.6) | (19.9) | (227.8) | | Joint arrangement reclassification (refer to Note 15) | 3.3 | 0.7 | – | 4.0 | | Taken to the income statement | 7.7 | 0.3 | 2.5 | 10.5 | | Taken to other comprehensive income | – | (1.4) | 0.4 | (1.0) | | Transfers between assets/liabilities | (56.7) | 0.6 | 1.3 | (54.8) | | Foreign currency translation | 19.2 | – | 0.3 | 19.5 | | **As at 31 December 2020** | **(232.8)** | **(1.4)** | **(15.4)** | **(249.6)** | | Taken to the income statement | (14.5) | 2.1 | 5.7 | (6.7) | | Taken to other comprehensive income | – | (9.0) | (6.7) | (15.7) | | Taken directly to equity | – | 4.1 | – | 4.1 | | Transfers between assets/liabilities | 1.7 | – | – | 1.7 | | Foreign currency translation | (5.8) | – | (1.1) | (4.9) | | **As at 31 December 2021** | **(249.4)** | **(4.2)** | **(17.5)** | **(271.1)** | Deferred tax assets recognised for tax losses carry-forward in accordance with the relevant local rules applying in the Group's jurisdictions can be analysed as follows: | | 2021 € million | 2020 € million | | --- | --- | --- | | Attributable to tax losses that expire within five years | 0.5 | 0.5 | | Attributable to tax losses that expire after five years | – | 0.1 | | Attributable to tax losses that can be carried forward indefinitely | 1.3 | 1.3 | | **Recognised deferred tax assets attributable to tax losses** | **1.8** | **1.9** | The Group has unrecognised deferred tax assets attributable to tax losses that are available to carry forward against future taxable income of €28.1 million (2020: €26.9 million). These are analysed as follows: | | 2021 € million | 2020 € million | | --- | --- | --- | | Attributable to tax losses that expire within five years | 19.5 | 15.3 | | Attributable to tax losses that expire after five years | 8.6 | 11.6 | | **Unrecognised deferred tax assets attributable to tax losses** | **28.1** | **26.9** | The aggregate amount of distributable reserves arising from the realised earnings of the Group's operations was €3,111.0 million in 2021 (2020: €2,651.3 million). No deferred tax liabilities have been recognised on such reserves given that their distribution is controlled by the Group or, in the event of plans to remit overseas earnings of subsidiaries, such distribution would not give rise to a tax liability. INTEGRATED ANNUAL REPORT 2021 169 ## 11. Earnings per share ### Accounting policy Basic earnings per share is calculated by dividing the net profit attributable to the owners of the parent by the weighted average number of ordinary shares outstanding during the year. The weighted average number of ordinary shares outstanding during the year is the number of ordinary shares outstanding at the beginning of the year, adjusted by the number of ordinary shares bought back or issued during the year multiplied by a time-weighting factor. Diluted earnings per share incorporates stock options for which the average share price for the year is in excess of the exercise price of the stock option and which create a dilutive effect. The calculation of the basic and diluted earnings per share attributable to the owners of the parent entity is based on the following data: | | 2021 | 2020 | | --- | --- | --- | | Net profit attributable to the owners of the parent (€ million) | **547.2** | 414.9 | | Weighted average number of ordinary shares for the purposes of basic earnings per share (million) | **365.0** | 364.0 | | Effect of dilutive stock options (million) | **1.3** | 1.3 | | Weighted average number of ordinary shares for the purposes of diluted earnings per share (million) | **366.3** | 365.3 | | **Basic earnings per share (€)** | **1.50** | **1.14** | | **Diluted earnings per share (€)** | **1.49** | **1.14** | ## 12. Components of other comprehensive income The components of other comprehensive income for the years ended 31 December comprise: | | 2021 | | | 2020 | | | | --- | --- | --- | --- | --- | --- | --- | | | Before tax € million | Income tax € million | Net of tax € million | Before tax € million | Income tax € million | Net of tax € million | | Cost of hedging (refer to Note 24) | **(2.7)** | — | **(2.7)** | (2.2) | — | (2.2) | | Cash flow hedges (refer to Note 24) | **69.5** | **(9.5)** | **60.0** | 22.7 | (2.4) | 20.3 | | Foreign currency translation gains/(losses) | **73.6** | — | **73.6** | (254.9) | — | (254.9) | | Valuation loss on equity investments at fair value through other comprehensive income | — | — | — | (0.2) | — | (0.2) | | Actuarial gains/(losses) | **16.1** | **(6.1)** | **10.0** | (12.5) | 2.0 | (10.5) | | Share of other comprehensive income/loss of equity method investments | **14.6** | — | **14.6** | (25.4) | — | (25.4) | | **Other comprehensive loss** | **171.1** | **(15.6)** | **155.5** | **(272.5)** | **(0.4)** | **(272.9)** | The foreign currency translation gain for 2021 primarily relates to the Russian Rouble and the Swiss Franc, while the loss from the foreign currency translation for 2020 primarily related to the Russian Rouble and the Nigerian Naira. ## 13. Intangible assets ### Accounting policy Intangible assets consist of goodwill, franchise agreements, trademarks and water rights. Goodwill and other indefinite-lived intangible assets are carried at cost less accumulated impairment losses, while intangible assets with finite lives are amortised over their useful economic lives. The useful lives, both finite and indefinite, assigned to intangible assets are evaluated on an annual basis. #### Intangible assets with indefinite lives ('not subject to amortisation') Intangible assets not subject to amortisation consist of goodwill, franchise agreements and trademarks. Goodwill is the excess of the consideration transferred over the fair value of the share of net assets acquired. Goodwill and fair value adjustments arising on the acquisition of subsidiaries are treated as the assets and liabilities of those subsidiaries. These balances are denominated in the functional currency of the subsidiary and are translated to Euro on a basis consistent with the other assets and liabilities of the subsidiary. The useful life of franchise agreements is usually based on the term of the respective franchise agreements. The Coca-Cola Company does not grant perpetual franchise rights outside the United States. However, given the Group's strategic relationship with The Coca-Cola Company and consistent with past experience, the Group believes that franchise agreements will continue to be renewed at each expiration date with no significant costs. The Group has concluded that the franchise agreements are perpetual in nature and they have therefore been assigned indefinite useful lives. The Group's trademarks are assigned an indefinite useful life when they have an established sales history in the applicable region, it is the intention of the Group to receive a benefit from them indefinitely and there is no indication that this will not be the case. Goodwill and other indefinite-lived intangible assets are tested for impairment annually and whenever there is an indication of impairment. 170 COCA-COLA HBC # Notes to the consolidated financial statements*continued* ## 13. Intangible assets *continued* ### Accounting policy *continued* #### Intangible assets with indefinite lives ('not subject to amortisation') *continued* For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the business combination in which the goodwill arose. Other indefinite-lived intangible assets are also allocated to the Group's cash-generating units expected to benefit from those intangibles. The cash-generating units ('unit') to which goodwill and other indefinite-lived intangible assets have been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount (i.e. the higher of the value-in-use and fair value less costs to sell) of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then pro rata to the other assets of the unit on the basis of the carrying amount of each asset in the unit. Impairment losses recognised against goodwill are not reversed in subsequent periods. #### Intangible assets with finite lives Intangible assets with finite lives mainly consist of water rights and certain brands, are amortised over their useful economic lives and are carried at cost less accumulated amortisation and impairment losses. Intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. #### Critical accounting estimates Determining whether goodwill or indefinite-lived intangible assets are impaired requires an estimation of the value-in-use of the cash-generating units to which they have been allocated in order to determine the recoverable amount of the cash-generating units. The value-in-use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit, discounted at an appropriate rate. Estimating the future cash flows involves a significant degree of uncertainty. The movements in intangible assets by classes of assets during the year are as follows: | | Goodwill € million | Franchise agreements € million | Trademarks € million | Other intangible assets € million | Total € million | | --- | --- | --- | --- | --- | --- | | **Cost** | | | | | | | As at 1 January 2020 | 1,956.1 | 146.4 | 187.1 | 27.6 | **2,317.2** | | Disposals | (38.4) | – | (42.3) | (12.7) | **(93.4)** | | Foreign currency translation | (31.1) | (1.6) | (7.5) | (0.1) | **(40.3)** | | **As at 31 December 2020** | **1,886.6** | **144.8** | **137.3** | **14.8** | **2,183.5** | | **Amortisation** | | | | | | | As at 1 January 2020 | 182.4 | – | 9.3 | 20.1 | **211.8** | | Charge for the year | – | – | 0.5 | 0.4 | **0.9** | | Disposals | – | – | (2.6) | (12.7) | **(15.3)** | | **As at 31 December 2020** | **182.4** | **–** | **7.2** | **7.8** | **197.4** | | Net book value as at 1 January 2020 | 1,773.7 | 146.4 | 177.8 | 7.5 | **2,105.4** | | **Net book value as at 31 December 2020** | **1,704.2** | **144.8** | **130.1** | **7.0** | **1,986.1** | | **Cost** | | | | | | | As at 1 January 2021 | 1,886.6 | 144.8 | 137.3 | 14.8 | **2,183.5** | | Additions (refer to Note 15) | 16.4 | – | – | – | **16.4** | | Arising from business combinations (refer to Note 23) | 1.0 | – | – | 3.1 | **4.1** | | Foreign currency translation | 37.7 | – | – | – | **37.7** | | **As at 31 December 2021** | **1,941.7** | **144.8** | **137.3** | **17.9** | **2,241.7** | | **Amortisation** | | | | | | | As at 1 January 2021 | 182.4 | – | 7.2 | 7.8 | **197.4** | | Charge for the year | – | – | 0.4 | 0.6 | **1.0** | | **As at 31 December 2021** | **182.4** | **–** | **7.6** | **8.4** | **198.4** | | Net book value as at 1 January 2021 | 1,704.2 | 144.8 | 130.1 | 7.0 | **1,986.1** | | **Net book value as at 31 December 2021** | **1,759.3** | **144.8** | **129.7** | **9.5** | **2,043.3** | Disposals of goodwill and trademarks in 2020 relate to the impact from the reorganisation of Multon (refer to Note 15), while the amount of €12.7 million relates to the write-off of fully amortised finite-lived other intangible assets. Additions of goodwill in 2021 are attributable to the demerger of the Group's mineral water and adult sparkling beverages integral joint venture in Italy as well as the formation of a joint operation in Romania, amounting to €15.6 million and €0.8 million respectively (refer to Note 15). 171INTEGRATED ANNUAL REPORT 2021 Intangible assets not subject to amortisation amounted to €2,028.9 million (2020: €1,973.8 million), and are presented in the charts below: 2021 2020 ## €2,028.9 million €1,973.8 million | Goodwill | €1,759.3m | Goodwill | €1,704.2m | | --- | --- | --- | --- | | Franchise agreements | €144.8m | Franchise agreements | €144.8m | | Trademarks | €124.8m | Trademarks | €124.8m | The carrying value of intangible assets subject to amortisation amounted to €14.4 million (2020: €12.3 million) and comprised water rights of€6.4 million, trademarks of €4.9 million and other intangible assets of €3.1 million (2020: €7.0 million water rights, €5.3 million trademarks and €nil other intangible assets). Impairment tests for goodwill and other indefinite‑lived intangible assets The recoverable amount of each cash-generating unit was determined through a value-in-use calculation. That calculation uses cash flow projections based on financial budgets approved by the Board of Directors covering a one‑year period and cash projections for four additional years. Cash flows for years two to five were projected by management based on operation and market-specific high-level assumptions including growth rates, discount rates and forecast selling prices and direct costs. Management determined gross margins based on past performance, expectations for the development of the market and expectations about raw material costs. Management has also considered the key impacts from the COVID-19 pandemic when determining the relevant assumptions and has found them to be limited considering the business’s strong performance throughout the development of the pandemic across the Group’s territories and the reopening of global economies along with vaccination programmes’ progress. Management also considered the potential adverse impact arising from climatechange on the cost of water, under different climate scenarios. The growth rates used in perpetuity reflect the forecasts in line withmanagement beliefs. These forecasts exceeded, in certain cases, those expected for the industry in general, due to the strength of ourbrand portfolio. Management estimates discount rates using rates that reflect current market assessments of the time value of money and risks specific to the countries of operation. The Group applies post-tax discount rates to post-tax cash flows, as the valuation calculated using this method closely approximates to applying pre-tax discount rates to pre-tax cash flows. No impairment of goodwill and other indefinite-lived assets was identified from the impairment tests of 2021 and 2020. The following table sets forth the carrying value of goodwill and other indefinite-lived intangible assets for those cash-generating units whose carrying value is greater than 10% of the total, as at 31 December 2021. Franchise Goodwill agreements Trademarks Total € million € million € million € million Italy 640.9 126.9 – 767.8 Switzerland 443.9 – – 443.9 The Republic of Ireland and Northern Ireland 253.4 – – 253.4 Koncern Bambi a.d. Požarevac 115.0 – 118.3 233.3 All other cash-generating units 306.1 17.9 6.5 330.5 Total 1,759.3 144.8 124.8 2,028.9 172 COCA-COLA HBC ### Notes to the consolidated financial statements continued ### 13. Intangible assets continued The carrying value percentage of intangible assets not subject to amortisation as at 31 December 2021 for the above cash-generating units is presented in the below graph. Also, for the above cash-generating units, cash flows beyond the five-year period (the period in perpetuity) have been extrapolated using the following estimated growth and discount rates: Growth rate in perpetuity (%) Discount rate (%) Intangible assets not subject to 2021 2020 2021 2020 amortisation asat31December 2021 (%) Italy 1.5 0.9 6.5 7.1 Switzerland 0.9 0.9 5.7 6.3 The Republic of Ireland andNorthern Ireland 4.0 4.0 5.6 6.3 Koncern Bambi a.d. Požarevac 4.5 4.5 6.6 7.7 Italy 38% Switzerland 22% The Republic of Ireland | and Northern Ireland | 12% | | --- | --- | | Koncern Bambi a.d. Požarevac | 12% | | Other | 16% | Sensitivity analysis In the cash‑generating unit of Italy, which held €767.8 million of goodwill and franchise agreements as at 31December 2021, possible changes in key assumptions of the 2021 impairment test would remove the remaining headroom. As at 31 December 2021, the recoverable amount of the Italian cash‑generating units calculated based on value‑in‑use exceeded the carrying value by €427.8 million; changes per assumption that would eliminate remaining headroom are summarised in the table below: Average gross Growth rate in profit margin perpetuity Discount rate Italy 300bps 250bps 200bps As at 31 December 2021, the recoverable amount of the Nigerian cash-generating unit calculated based on value-in-use significantly exceeded its carrying value. As a result, the key assumptions of the Nigerian cash-generating unit’s impairment test that were disclosed asat31 December 2020, are not sensitive to possible changes to a degree that would remove the remaining headroom. The Group will continue to closely monitor these cash-generating units in order to ensure that timely actions and initiatives are undertaken to minimise potential adverse impact on their expected performance, particularly in relation to potential currency volatility in Nigeria. ### 14. Property, plant and equipment Accounting policy All property, plant and equipment is initially recorded at cost and subsequently measured at cost less accumulated depreciation and impairment losses. Subsequent expenditure is added to the carrying value of the asset when it is probable that future economic benefits, in excess of the original assessed standard of performance of the existing asset, will flow to the operation and the costs can be measured reliably. All other subsequent expenditure is expensed in the period in which it is incurred. Assets under construction are recorded as part of property, plant and equipment and depreciation on these assets commences when theassets are made available for use. Depreciation is calculated on a straight‑line basis to allocate the depreciable amount over the estimated useful life of the assets as follows: Freehold buildings and improvements 40 years Leasehold buildings and improvements Over the lease term, up to 40 years Production equipment 4 to 20 years Vehicles 5 to 8 years Computer hardware and software 3 to 10 years Marketing equipment 3 to 10 years Fixtures and fittings 8 years Returnable containers 3 to 12 years INTEGRATED ANNUAL REPORT 2021 173 # **Accounting policy continued** Freehold land is not depreciated as it is considered to have an indefinite life. Deposits received for returnable containers by customers are accounted for as deposit liabilities (refer to Note 20). Residual values and useful lives of assets are reviewed and adjusted if appropriate at each balance sheet date. Property, plant and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the asset's fair value less cost to sell and its value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest level of separately identifiable cash flows. For the accounting policy regarding right-of-use assets refer to Note 16 'Leases'. The movements of property, plant and equipment by class of asset are as follows: | | Land and buildings € million | Plant and equipment € million | Returnable containers € million | Assets under construction € million | Total € million | | --- | --- | --- | --- | --- | --- | | **Cost** | | | | | | | As at 1 January 2020 | 1,490.4 | 3,807.9 | 425.1 | 123.5 | **5,846.9** | | Additions | 4.7 | 111.7 | 36.9 | 351.7 | **505.0** | | Disposals^{1} | (18.8) | (202.6) | (17.3) | (3.5) | **(242.2)** | | Reclassified from assets held for sale (refer to Note 19) | – | 3.9 | – | – | **3.9** | | Reclassified to assets held for sale (refer to Note 19) | (3.1) | (0.7) | – | – | **(3.8)** | | Reclassifications | 54.1 | 202.6 | – | (256.7) | – | | Foreign currency translation | (114.6) | (325.8) | (24.0) | (15.2) | **(479.6)** | | **As at 31 December 2020** | **1,412.7** | **3,597.0** | **420.7** | **199.8** | **5,630.2** | | **Depreciation and impairment** | | | | | | | As at 1 January 2020 | 496.9 | 2,564.0 | 247.0 | 1.0 | **3,308.9** | | Charge for the year | 42.0 | 247.7 | 27.6 | – | **317.3** | | Impairment | 3.9 | 10.7 | 0.8 | 0.2 | **15.6** | | Disposals^{2} | (7.4) | (180.4) | (10.4) | – | **(198.2)** | | Reclassified from assets held for sale (refer to Note 19) | – | 3.8 | – | – | **3.8** | | Reclassified to assets held for sale (refer to Note 19) | (2.0) | (0.7) | – | – | **(2.7)** | | Foreign currency translation | (34.8) | (204.3) | (9.9) | – | **(249.0)** | | **As at 31 December 2020** | **498.6** | **2,440.8** | **255.1** | **1.2** | **3,195.7** | | **Net book value as at 31 December 2020 excluding right-of-use assets** | **914.1** | **1,156.2** | **165.6** | **198.6** | **2,434.5** | | **Net book value of right-of-use assets as at 31 December 2020** | **71.9** | **110.2** | **–** | **–** | **182.1** | | **Net book value as at 31 December 2020** | **986.0** | **1,266.4** | **165.6** | **198.6** | **2,616.6** | | **Cost** | | | | | | | As at 1 January 2021 | 1,412.7 | 3,597.0 | 420.7 | 199.8 | **5,630.2** | | Additions^{2} | 7.6 | 137.0 | 40.9 | 297.1 | **482.6** | | Arising from business combinations (refer to Note 23) | – | 1.3 | – | – | **1.3** | | Disposals | (9.2) | (166.8) | (12.3) | (0.1) | **(188.4)** | | Reclassified to assets held for sale (refer to Note 19) | – | (1.8) | – | – | **(1.8)** | | Reclassifications | 90.8 | 247.7 | – | (338.5) | – | | Foreign currency translation | 28.1 | 76.2 | 1.6 | 0.8 | **106.7** | | **As at 31 December 2021** | **1,530.0** | **3,890.6** | **450.9** | **159.1** | **6,030.6** | | **Depreciation and impairment** | | | | | | | As at 1 January 2021 | 498.6 | 2,440.8 | 255.1 | 1.2 | **3,195.7** | | Charge for the year | 42.9 | 206.5 | 27.6 | – | **277.0** | | Impairment | 1.0 | 4.0 | 0.5 | 0.5 | **6.0** | | Disposals | (2.1) | (165.4) | (9.7) | – | **(177.2)** | | Reclassified to assets held for sale (refer to Note 19) | – | (1.7) | – | – | **(1.7)** | | Foreign currency translation | 11.8 | 50.1 | 0.6 | – | **62.5** | | **As at 31 December 2021** | **552.2** | **2,534.3** | **274.1** | **1.7** | **3,362.3** | | **Net book value as at 31 December 2021 excluding right-of-use assets** | **977.8** | **1,356.3** | **176.8** | **157.4** | **2,668.3** | | **Net book value of right-of-use assets as at 31 December 2021** | **63.2** | **99.4** | **–** | **–** | **162.6** | | **Net book value as at 31 December 2021** | **1,041.0** | **1,455.7** | **176.8** | **157.4** | **2,830.9** | 1. Disposables for 2020 includes €29.8 million on a net book value basis regarding the impact of the reorganisation of Mutton (refer to Note 15). 2. Additions line for 2021 includes €13.8 million on a net book value basis regarding the impact of the demerger of the Group's mineral water and adult sparking beverages integral joint venture in Italy (refer to Note 15). 174 COCA-COLA HBC # Notes to the consolidated financial statements *continued* ## 14. Property, plant and equipment *continued* Assets under construction at 31 December 2021 include advances for equipment purchases of €41.8 million (2020: 52.6 million). The depreciation charge for the year, including that for right-of-use assets (refer to Note 16), recognised in operating expenses and cost of goods sold amounted to €181.4 million (2020: €194.0 million) and €148.9 million (2020: €178.5 million) respectively. ### Impairment of property, plant and equipment In 2020, the Group recorded impairment losses of €6.0 million, €2.5 million and €9.9 million and reversals of impairment of €0.3 million, €0.1 million and €2.4 million relating to property, plant and equipment in the Established, Developing and Emerging segments respectively. The impaired assets, being mainly buildings and production equipment, were written down based mainly on value-in-use calculations. In 2021, the Group recorded impairment losses of €3.7 million, €0.9 million and €3.8 million and reversals of impairment of €0.2 million, €0.3 million and €1.9 million relating to property, plant and equipment in the Established, Developing and Emerging segments respectively. The impaired assets, being mainly buildings and production equipment, were written down based mainly on value-in-use calculations. ## 15. Interests in other entities ### List of principal subsidiaries The following are the principal subsidiaries of the Group as at 31 December: | | Country of registration | % of voting rights | | % ownership | | | --- | --- | --- | --- | --- | --- | | | | 2021 | 2020 | 2021 | 2020 | | AS Coca-Cola HBC Eesti | Estonia | 100.0% | 100.0% | 100.0% | 100.0% | | CCB Management Services GmbH | Austria | 100.0% | 100.0% | 100.0% | 100.0% | | CCHBC Armenia CJSC | Armenia | 100.0% | 100.0% | 100.0% | 100.0% | | CCHBC Bulgaria AD | Bulgaria | 99.4% | 99.4% | 99.4% | 99.4% | | CCHBC Insurance (Guernsey) Limited^{1} | Guernsey | — | 100.0% | — | 100.0% | | CCHBC IT Services Limited | Bulgaria | 100.0% | 100.0% | 100.0% | 100.0% | | CCHBC Reinsurance Designated Activity Company | Republic of Ireland | 100.0% | 100.0% | 100.0% | 100.0% | | CCH CirculaRPE T.S.r.l.^{2} | Italy | 100.0% | — | 100.0% | — | | Coca-Cola HBC Austria GmbH | Austria | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola Beverages Belorussiya | Belarus | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola Beverages Ukraine Ltd | Ukraine | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola Imbutellere Chisinau SRL | Moldova | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola HBC B-H.d.o. Sarajevo | Bosnia and Herzegovina | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola HBC Česko a Slovensko, s.r.o. | Czech Republic | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola HBC Česká a Slovensko, s.r.o. – organizačná zložka | Slovakia | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola HBC Cyprus Ltd | Cyprus | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola HBC Finance B.V. | The Netherlands | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola HBC Greece S.A.I.C. | Greece | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola HBC Holdings B.V. | The Netherlands | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola HBC Hrvatska d.o.o. | Croatia | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola HBC Hungary Ltd | Hungary | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola HBC Ireland Limited | Republic of Ireland | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola HBC Italia S.r.l. | Italy | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola HBC Kosovo L.L.C. | Kosovo | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola HBC Northern Ireland Limited | Northern Ireland | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola HBC Polska sp. z o.o. | Poland | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola HBC Romania Ltd | Romania | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola HBC Services MEPE | Greece | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola HBC Slovenija d.o.o. | Slovenia | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola HBC Sourcing B.V. | The Netherlands | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola HBC Switzerland Ltd | Switzerland | 99.9% | 99.9% | 99.9% | 99.9% | | Coca-Cola HBC Srbija d.o.o. | Serbia | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola Hellenic Bottling Company–Crna Gora d.o.o., Podgorica | Montenegro | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola Hellenic Business Service Organisation | Bulgaria | 100.0% | 100.0% | 100.0% | 100.0% | | Coca-Cola Hellenic Procurement GmbH | Austria | 100.0% | 100.0% | 100.0% | 100.0% | | CC Beverages Holdings II B.V. | The Netherlands | 100.0% | 100.0% | 100.0% | 100.0% | | Koncern Bambi a.d. Požarevac | Serbia | 100.0% | 100.0% | 100.0% | 100.0% | | LLC Coca-Cola HBC Eurasia | Russia | 100.0% | 100.0% | 100.0% | 100.0% | | Nigerian Bottling Company Ltd | Nigeria | 100.0% | 100.0% | 100.0% | 100.0% | | SIA Coca-Cola HBC Latvia | Latvia | 100.0% | 100.0% | 100.0% | 100.0% | | UAB Coca-Cola HBC Lietuva | Lithuania | 100.0% | 100.0% | 100.0% | 100.0% | 1. CCHBC Insurance (Guernsey) Limited was placed under liquidation as at 31 December 2020 and dissolved on 19 February 2021. 2. CCH CirculaRPE T.S.r.l. was established on 1 May 2021. INTEGRATED ANNUAL REPORT 2021 173 ## Associates and joint arrangements ### Accounting policies Equity method investments comprise investments in associates and joint arrangements and are classified into integral and non-integral on the basis of whether they are considered part of the Group's core operations and strategy. ### Investments in associates Investments in associated undertakings are accounted for by the equity method of accounting. Associated undertakings are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% to 50% of the voting rights. The equity method of accounting involves recognising the Group's share of the associates' post-acquisition profit or loss and movements in other comprehensive income for the period in the income statement and other comprehensive income respectively. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate. The Group's interest in each associate is carried in the balance sheet at an amount that reflects its share of the net assets of the associate and includes goodwill on acquisition. When the Group's share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless the Group has incurred obligations or made payments on behalf of the associate. ### Investments in joint arrangements Joint arrangements are arrangements in which the Group has contractually agreed sharing of control, which exists only when decisions about the relevant activities require unanimous consent. Joint arrangements are classified as joint ventures or joint operations depending upon the rights and obligations arising from the joint arrangement. The Group classifies a joint arrangement as a joint venture when the Group has rights to the net assets of the arrangement. The Group accounts for its interests in joint ventures using the equity method of accounting as described in the section above. The Group classifies a joint arrangement as a joint operation when the Group has the rights to the assets, and obligations for the liabilities, of the arrangement and accounts for each of its assets, liabilities, revenues and expenses, including its share of those held or incurred jointly, in relation to the joint operation. If facts and circumstances change, the Group reassesses whether it still has joint control and whether the type of joint arrangement in which it is involved has changed. ### Critical accounting judgements The Group participates in several joint arrangements. Judgement is required in order to determine their classification as a joint venture where the Group has rights to the net assets of the arrangement, or a joint operation where the Group has rights to the assets and obligations for the liabilities of the arrangement. In making this judgement, consideration is given to the legal form of the arrangement, and the contractual terms and conditions, as well as other facts and circumstances (including the economic rationale of the arrangement and the impact of the legal framework). ### a) Equity method investments Changes in the carrying amounts of equity method investments are as follows: | | Associates € million | Joint ventures € million | Total € million | | --- | --- | --- | --- | | As at 1 January 2020 | 29.2 | 119.3 | 148.5 | | Additions | 2.4 | 194.3 | 196.7 | | Decrease | – | (1.7) | (1.7) | | Share of results of equity method investments | 3.5 | 21.4 | 24.7 | | Share of other comprehensive income of equity method investments | (4.0) | (21.4) | (25.4) | | Share of total comprehensive income | (0.7) | – | (0.7) | | Dividends | (1.3) | (27.8) | (29.1) | | **As at 31 December 2020** | **29.6** | **284.1** | **313.7** | | Additions | 88.0 | – | 88.0 | | Decrease | – | (34.6) | (34.6) | | Share of results of equity method investments | 3.2 | 34.4 | 37.6 | | Share of other comprehensive income of equity method investments | – | 14.6 | 14.6 | | Share of total comprehensive income | 3.2 | 49.0 | 52.2 | | Return of capital | – | (6.1) | (6.1) | | Dividends | (1.9) | (45.5) | (47.4) | | **As at 31 December 2021** | **118.9** | **246.9** | **365.8** | 176 COCA-COLA HSC ## Notes to the consolidated financial statements *continued* ### 15. Interests in other entities *continued* The carrying amount of equity method investments as at 31 December 2021 comprises integral and non-integral equity method investments as follows: | | Associates € million | Joint ventures € million | Total € million | | --- | --- | --- | --- | | Integral equity method investments | — | 242.7 | 242.7 | | Non-integral equity method investments | 118.9 | 4.2 | 123.1 | | **Total equity method investments** | **118.9** | **246.9** | **365.8** | #### Associates Additions in 2020 regarding associates relate to acquisitions of non-integral associates in our Established segment for a total consideration of €2.4 million, including acquisition costs of €0.2 million. Frigoglass Industries (Nigeria) Limited, a non-integral associate in which the Group holds an effective interest of 23.9% (2020: 23.9%) through its subsidiary Nigerian Bottling Company Ltd. is guarantor under the amended banking facilities and notes issued by the Frigoglass Group, as part of the debt restructuring of the latter. The Group has no direct exposure arising from this guarantee arrangement, but the Group's investment in this associate, which stood at €25.2 million as at 31 December 2021 (31 December 2020: €23.9 million), would be at potential risk if there was a default under the terms of the amended banking facilities or the notes and the Frigoglass Group (including the guarantor) was unable to meet its obligations thereunder. On 7 October 2021, the Group acquired a 30% equity shareholding in Casa Del Caffè Vergnano S.p.A. ('Caffè Vergnano'), a premium Italian coffee company. The Group also entered into an exclusive distribution agreement for Caffè Vergnano's products in all its territories outside of Italy. The corresponding investment was classified as an associate in accordance with the requirements of IAS 28 Investments in Associates and Joint Ventures' since the terms of the transaction give the Group significant influence over the investee. The investment is accounted for using the equity method and was further classified as a non-integral equity method investment in the consolidated financial statements of the Group, considering that the distribution agreement was separate to the shareholding. The total consideration paid amounted to €87.0 million, including acquisition costs of €0.1 million, and was presented in the line 'Payments for acquisition of non-integral equity method investments' within the consolidated cash flow statement, while acquisition costs of €1.0 million were incurred but not yet paid as at 31 December 2021. Consideration and acquisition costs were presented in the line 'Additions' of the table above detailing 2021 changes in the carrying amounts of equity method investments. #### Joint ventures In January 2021, a demerger of Acque Mineral S.r.l., our mineral water and adult sparkling beverages integral joint venture with The Coca-Cola Company in Italy, was completed. As part of the demerger, certain operating activities were transferred to the Group, resulting in the recognition of €15.6 million of goodwill and €14.0 million of property, plant and equipment, including right-of-use assets, as part of the Group's Italian cash-generating unit (refer to Note 13 and Note 14 respectively) and the decrease in equity method investments, by €34.6 million, presented in the line 'Decrease' within the table above detailing 2021 changes in the carrying amounts of equity method investments. There was no significant impact on the Group's net assets or income statement from this transaction. Also, there was no cash flow impact for the Group as a result of the transaction. #### Investments in joint ventures The Group has a 30% interest in the Multon Z.A.O. group of companies ('Multon'), which is engaged in the production and distribution of juices in Russia and is jointly controlled by the Group and The Coca-Cola Company. The joint arrangement was initially classified as a joint operation, as it provided to the Group and The Coca-Cola Company rights to the assets and obligations for the liabilities of the joint arrangement. On 6 May 2020, following the completion of Multon's reorganisation, the joint arrangement was reclassified from a joint operation to an integral joint venture, as the new structure gives the Group and The Coca-Cola Company rights to the joint arrangement's net assets. As a result, the Group derecognised its share of the joint arrangement's assets and liabilities with a corresponding increase in equity method investments of €194.1 million, presented in the line 'Additions' of the table above detailing changes in the carrying amount of equity method investments for 2020. No gain or loss was recognised in the 2020 consolidated income statement as a result of the above reorganisation. More specifically, intangible assets, property, plant and equipment (excluding right-of-use assets) and right-of-use assets decreased by €78.1 million, €29.8 million and €1.1 million respectively in 2020 as a result of the above reorganisation (refer to Note 13 and Note 14 respectively). In addition, the decrease of cash and cash equivalents resulting from the reorganisation of Multon, amounting to €13.1 million, was reported in the line 'Joint arrangement reclassification' within investing activities in the 2020 consolidated cash flow statement. Apart from Multon, the Group has a significant joint venture with Heineken, through its 50% interest in AD Pivara Skopje which is engaged in the bottling and distribution of soft drinks and beer in North Macedonia. The joint venture was previously conducted through a number of legal entities, being the BrewTech B.V. group of companies. BrewTech B.V. was incorporated in the Netherlands and the Group owned 50% of its share capital, up to its liquidation on 31 December 2021. As a result of the liquidation, BrewTech B.V.'s interest in AD Pivara Skopje was transferred by way of liquidation proceeds to its direct shareholders, being the Group and Heineken. The structure of the joint venture provides the Group with rights to its net assets. INTEGRATED ANNUAL REPORT 2021 177 Summarised financial information of the Group's significant joint ventures are as follows (the information below reflects the amount presented in the IFRS financial statements of the joint venture, and not the Group's share in those amounts): | | 2021 € million | 2020 € million | | --- | --- | --- | | **Multon Z.A.O. group of companies** | | | | **Summarised balance sheet:** | | | | Non-current loans to related parties | 5.1 | 56.5 | | Other non-current assets | 137.9 | 123.9 | | **Non-current assets** | **143.0** | **180.4** | | Cash and cash equivalents | 9.0 | 3.4 | | Current loans to related parties | 54.1 | 20.8 | | Other current assets | 131.5 | 111.6 | | **Total current assets** | **194.6** | **135.8** | | Other current liabilities (including trade payables) | (76.0) | (52.8) | | **Total current liabilities** | **(76.0)** | **(52.8)** | | **Non-current other liabilities** | **(7.4)** | **(7.0)** | | **Net assets** | **254.2** | **256.4** | | **Summarised statement of comprehensive income:** | | | | Revenue | 417.0 | 367.3 | | Depreciation | (5.4) | (7.4) | | Interest income | 7.7 | 11.8 | | Interest expense | (1.5) | (4.6) | | Profit before tax | 65.0 | 62.0 | | Income tax expense | (12.6) | (12.8) | | Profit after tax | 52.4 | 49.2 | | Other comprehensive income | 29.0 | (105.0) | | **Total comprehensive income** | **81.4** | **(55.8)** | | **Dividends received and capital returns (refer to Note 27)** | **34.8** | **25.8** | | **Reconciliation of net assets to carrying amount:** | | | | Closing net assets | 254.2 | 256.4 | | Interest in joint venture at 50% | 127.1 | 128.2 | | Goodwill | 37.6 | 34.7 | | **Carrying value** | **164.7** | **162.9** | Following the reorganisation, the Group's share of results and share of other comprehensive income of the Multon joint venture for 2020 amounted to €16.4 million income and €21.6 million loss respectively. | | 2021 € million | 2020 € million | | --- | --- | --- | | **AD Pivara Skopje^{1}** | | | | **Summarised balance sheet:** | | | | Non-current assets | 56.7 | 53.9 | | Cash and cash equivalents | 0.2 | 2.5 | | Current loans to related parties | — | 10.0 | | Other current assets | 13.6 | 9.5 | | **Total current assets** | **13.8** | **22.0** | | **Total current liabilities** | **(20.7)** | **(15.7)** | | **Non-current other liabilities** | **(0.7)** | **(0.8)** | | **Net assets** | **49.1** | **59.4** | | **Summarised statement of comprehensive income:** | | | | Revenue | 79.3 | 66.0 | | Depreciation | (5.3) | (5.7) | | Profit before tax | 17.2 | 15.0 | | Income tax expense | (2.0) | (1.8) | | Profit after tax | 15.2 | 13.2 | | **Total comprehensive income** | **15.2** | **13.2** | | **Dividends received (refer to Note 27)** | **13.0** | **1.3** | | **Reconciliation of net assets to carrying amount:** | | | | Closing net assets | 49.1 | 59.4 | | Interest in joint venture at 50% | 24.6 | 29.7 | | Goodwill | 16.9 | 16.9 | | Non-controlling interest | (1.6) | (1.6) | | **Carrying value** | **39.9** | **45.0** | 1 Figures for 2020 relate to the BrewTech B.V. group of companies, which refers to the previous structure of the joint venture as described above. 178 COCA-COLA HBC # Notes to the consolidated financial statements *continued* ## 15. Interests in other entities *continued* Summarised financial information for the Group's investment in other joint ventures is as follows: | | 2021 € million | 2020 € million | | --- | --- | --- | | **Carrying amount** | **42.3** | 76.2 | | Share of profit | 0.6 | (1.6) | | Share of other comprehensive income | 0.1 | 0.2 | | **Share of total comprehensive income** | **0.7** | **(1.4)** | ### b) Joint operations Other joint operations of the Group with The Coca-Cola Company comprise mainly a 50% interest in each of the water businesses listed below, which are engaged in the production and distribution of water in the respective countries. | Country | Joint operation | Country | Joint operation | | --- | --- | --- | --- | | Austria | Römerquelle | Poland | Multivita | | Italy | Fonti del Vulture | Switzerland | Valser | | Romania | Donna | Serbia | Vlasinka | | Baltics | Neptuno Vandenys | | | In addition, in April 2021 the Group acquired a 50% interest in Stockday S.R.L., an online business-to-business platform and distributor in Romania, which was up until that point wholly owned by HENEKEN Romania S.A. The transaction resulted in the two shareholders jointly controlling Stockday S.R.L. The joint arrangement was classified as a joint operation in accordance with the requirements of IFRS 11 'Joint arrangements', as it provides to the shareholders rights to the assets and obligations for the liabilities of the joint arrangement. As a result of the above transaction, goodwill of €0.8 million was recognised within the Group's Emerging segment (refer to Note 15). ## 16. Leases ### Accounting policy Leases for which the Group is in a lessee position are recognised as a right-of-use asset and a corresponding lease liability at the date at which the lease asset is available for use by the Group. Assets and liabilities arising from a lease are initially measured on a net-present-value basis and are recognised as part of 'Property, plant and equipment', 'Current borrowings' and 'Non-current borrowings' in the consolidated balance sheet respectively. Lease contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease and non-lease components respectively. Consideration relevant to the non-lease component is recognised as an expense in the consolidated income statement over the period of the lease. Lease liabilities include the net present value of the following lease payments: - a) fixed payments (including in-substance fixed payments) over the lease term, less any lease incentives receivable; - b) variable lease payments that are based on an index or a rate; - c) amounts expected to be payable by the lessee under residual value guarantees; - d) the exercise price of a purchase option if the Group is reasonably certain it will exercise that option; and - e) payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset. Variable lease payments that do not depend on an index or a rate are recognised as an expense in the period in which the event or condition that triggers the payment occurs. The lease payments are discounted using the interest rate implicit in the lease (if that rate can be determined), or the incremental borrowing rate of the lease, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms, security and conditions. In determining the incremental borrowing rate to be used, the Group applies judgement to establish the suitable reference rate and credit spread. Each lease payment is allocated between the liability (principal) and finance cost. The interest expense is charged to the consolidated income statement as part of 'Finance cost' over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are measured at cost comprising the following: - a) the amount of the initial measurement of lease liability; - b) any lease payments made at or before the commencement date less any lease incentives received; - c) any initial direct costs; and - d) any restoration costs. The right-of-use assets are depreciated over the shorter of the assets' useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life. INTEGRATED ANNUAL REPORT 2021 179 # **Accounting policy continued** The Group utilises a number of practical expedients permitted by the standard, namely: 1) applying the recognition exemption to short-term leases (i.e. leases with a term of 12 months or less) that do not contain a purchase option; and 2) applying the recognition exemption to leases of underlying assets with a low value, which mainly comprise IT equipment. Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in the consolidated income statement. In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment is revised if a significant event or a significant change in circumstances occurs, which affects this assessment and which is within the control of the lessee. Lease payments are presented as follows in the consolidated cash flow statement: - short-term lease payments, payments for leases of low-value assets and variable lease payments that are not included in the measurement of the lease liabilities are presented within cash flows from operating activities; - payments for the interest element of recognised lease liabilities are included in 'Interest paid' within cash flows from financing activities; and - payments for the principal element of recognised lease liabilities are presented within cash flows from financing activities. # **Leasing activities** The leases which are recorded on the consolidated balance sheet are principally in respect of vehicles and buildings. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. Extension and termination options are included in a number of leases across the Group. These are used to maximise operational flexibility in terms of managing the assets used in the Group's operations. Extension options considered reasonably certain to be exercised relate both to buildings and motor vehicles and do not exceed six and three years respectively. Most termination options have not been considered reasonably certain to be exercised. The Group's carrying amount of lease liability is presented below as at 31 December: | | 2021 € million | 2020 € million | | --- | --- | --- | | Current lease liability | 50.9 | 54.8 | | Non-current lease liability | 109.4 | 129.4 | | **Total lease liability (refer to Note 25)** | **160.3** | **184.2** | For the carrying amount of right-of-use assets per class of underlying asset, refer to Note 14. The Group's additions to right-of-use assets for the years ended 31 December are as follows: | | 2021 € million | 2020 € million | | --- | --- | --- | | Land and buildings | 10.4 | 17.4 | | Plant and equipment | 31.6 | 36.2 | | **Total additions** | **42.0** | **53.6** | The consolidated income statement includes the following amounts relating to depreciation of right-of-use assets: | | 2021 € million | 2020 € million | | --- | --- | --- | | Land and buildings | 19.5 | 19.4 | | Plant and equipment | 33.8 | 35.8 | | **Total depreciation charge** | **53.3** | **55.2** | The following expenses have been included in cost of goods sold and operating expenses: | | 2021 € million | 2020 € million | | --- | --- | --- | | Expense relating to short-term leases | 15.1 | 15.5 | | Expense relating to leases of low-value assets | 1.4 | 1.3 | | Expense relating to variable lease payments | 7.4 | 5.1 | Interest expense on leases in 2021 was €9.9 million (2020: €11.4 million) and is recorded within 'Finance costs' (refer to Note 9). The total cash outflow for leases in 2021 was €91.0 million (2020: €87.6 million). Expenses relating to short-term leases in 2021 and 2020 comprise consideration for leases with a term of 12 months or less used to cover seasonal business needs. 180 COCA-COLA HSC # Notes to the consolidated financial statements *continued* ## 17. Inventories ### Accounting policy Inventories are stated at the lower of cost and net realisable value. Cost for raw materials and consumables is determined on a weighted average basis. Cost for work in progress and finished goods comprises the cost of direct materials and labour plus attributable overhead costs. Cost of inventories includes all costs incurred to bring the product to its present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary to complete and sell the inventory. Inventories consisted of the following as at 31 December: | | 2021 € million | 2020 € million | | --- | --- | --- | | Finished goods | 244.0 | 182.9 | | Raw materials and work in progress | 208.0 | 175.7 | | Consumables | 67.8 | 59.0 | | **Total inventories** | **519.8** | **417.6** | The amount of inventories recognised as an expense during 2021 was €3,420.4 million (2020: €2,839.6 million). During 2021, provision for obsolete inventories recognised as an expense amounted to €16.2 million (2020: €23.9 million), whereas provision reversed in the year amounted to €0.6 million (2020: €0.6 million). ## 18. Trade, other receivables and assets ### Accounting policies Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method. The normal credit terms are between 7-90 days upon delivery. The Group applies the IFRS 9 simplified approach for trade and other receivables and follows an Expected Credit Losses ('ECLs') approach for measuring the allowance of its trade receivables. The expected loss rate is assessed on the basis of historical credit losses of 24 months before the year end and adjusted to reflect current and forward-looking information. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive. The carrying amount of the receivable is reduced by the loss allowance, which is recognised as part of operating expenses. If a trade receivable ultimately becomes uncollectible, it is written off initially against any loss allowance made in respect of that receivable with any excess recognised as part of operating expenses. Subsequent recoveries of amounts previously written off or loss allowance no longer required are credited against operating expenses. As of July 2020, the Group has entered into a contract that provides insurance coverage against defaulted trade receivables. This contract meets the definition of a financial guarantee contract, which is in substance part of the contract terms (that is, integral to the trade receivables) and is not recognised separately. Therefore, the expected cash flows from the credit insurance are included in the measurement of ECLs of trade receivables. Loans are initially recognised at the fair value net of transaction costs incurred. After initial recognition, all interest-bearing loans are subsequently measured at amortised cost. Amortised cost is calculated using the effective interest rate method whereby any discount, premium or transaction costs associated with a loan are amortised to the income statement over the lending period. Trade, other receivables and assets consisted of the following as at 31 December: | | Current assets | | Non-current assets | | | --- | --- | --- | --- | --- | | | 2021 € million | 2020 € million | 2021 € million | 2020 € million | | Trade receivables | 705.5 | 558.7 | 0.1 | 0.9 | | Receivables from related parties (refer to Note 27) | 60.4 | 47.8 | – | – | | Loans receivable | 0.5 | 1.8 | 1.0 | 0.5 | | Receivables from sale of property, plant and equipment | 0.5 | 0.9 | – | – | | Loans and advances to employees | 6.0 | 7.4 | – | – | | Other receivables | 89.3 | 71.8 | – | – | | **Total trade and other receivables** | **862.2** | **688.4** | **1.1** | **1.4** | | Prepayments | 69.4 | 61.4 | 10.4 | 21.2 | | Pension plan assets (refer to Note 21) | – | – | 42.0 | 21.0 | | Non-current income tax receivable | – | – | 16.3 | 36.9 | | VAT and other taxes receivable | 17.0 | 24.1 | – | – | | **Total other assets** | **86.4** | **85.5** | **68.7** | **79.1** | | **Total trade, other receivables and assets** | **948.6** | **773.9** | **69.8** | **80.5** | An amount of €43.9 million (2020: €31.3 million) included in 'Other receivables' relates to receivables from brand partners in the sale and distribution of premium spirits and energy drinks. Non-current trade receivables relate to renegotiated receivables, which are expected to be settled within the new contractual due date. Refer to Note 22 for offsetting impact on trade receivables. 181INTEGRATED ANNUAL REPORT 2021 Trade receivables Trade receivables classified as current assets consisted of the following as at 31 December: 2021 2020 € million € million Trade receivables 781.6 646.5 Less: Loss allowance (76.1) (87.8) Total trade receivables 705.5 558.7 The ageing analysis of trade receivables classified as current assets is as follows: | | 2021 | | | | | 2020 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | € million | | | | | € million | | | | | Gross | | | | | Gross | | | | | | carrying | | Loss | | Trade | carrying | | Loss | | Trade | | amount | allowance | | receivables | | amount | allowance | | receivables | | Within due date 636.7 (2.9) 633.8 500.3 (2.4) 497.9 Past due – up to three months 54.2 (1.2) 53.0 35.4 (2.1) 33.3 Past due – three to six months 6.9 (1.0) 5.9 7.5 (1.4) 6.1 Past due – six to nine months 3.3 (1.0) 2.3 2.7 (0.8) 1.9 Past due – more than nine months 80.5 (70.0) 10.5 100.6 (81.1) 19.5 Total trade receivables 781.6 (76.1) 705.5 646.5 (87.8) 558.7 The movement in the loss allowance during the year is as follows: 2021 2020 € million € million As at 1 January (87.8) (93.2) Amounts written off during the year 14.7 5.5 Amounts recovered during the year 3.7 5.5 Increase in allowance recognised in income statement (6.1) (7.9) Foreign currency translation (0.6) 2.3 As at 31 December (76.1) (87.8) Receivables from related parties The related party receivables, net of the loss allowance, are as follows: 2021 2020 € million € million Within due date 57.3 44.5 Past due 3.3 3.6 Less: Loss allowance (0.2) (0.3) Total related party receivables 60.4 47.8 The ageing analysis of these receivables is as follows: 2021 2020 € million € million Within due date 57.2 44.5 Past due – up to three months 2.6 2.3 Past due – three to six months 0.4 0.3 Past due – six to nine months – 0.1 Past due – more than nine months 0.2 0.6 Total 60.4 47.8 Net impairment Net impairment loss on trade and other receivables recognised in the income statement is analysed as follows: 2021 2020 € million € million Trade receivables 3.7 2.8 Receivables from related parties – 0.1 Other receivables and assets 1.4 1.2 Net impairment loss 5.1 4.1 182 COCA-COLA HBC # Notes to the consolidated financial statements*continued* # **19. Assets classified as held for sale** # **Accounting policy** Non-current assets and disposal groups are classified as held for sale if it is considered highly probable that their carrying amount will be principally recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. In order for a sale to be considered highly probable, management must be committed to a plan to sell the asset, an active programme to locate a buyer and complete the plan must have been initiated, and the sale must be expected to be completed within one year from the date of classification. In the event that the criteria for continued classification as held for sale are no longer met, the assets are reclassified to property, plant and equipment and the depreciation charge is adjusted for the depreciation that would have been recognised had the assets not been classified as held for sale. Non-current assets and disposal groups classified as held for sale are measured at the lower of the individual assets' previous carrying amount and their fair value less costs to sell. As at 31 December 2021, the Group's assets classified as held for sale amounted to €0.1 million (£2020: €nil), comprising the net book value of plant and equipment in our Emerging segment that has been written down to fair value less costs to sell (refer to Note 14). The fair value of assets classified as held for sale was determined through the use of a sales comparison approach and is a non-recurring fair value measurement within level 3 of the fair value hierarchy. # **20. Trade and other payables** # **Accounting policy** Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method. Trade and other payables consisted of the following as at 31 December: | | 2021 € million | 2020 € million | | --- | --- | --- | | Trade payables | 678.3 | 583.2 | | Accrued liabilities | 565.6 | 427.1 | | Payables to related parties (refer to Note 27) | 326.1 | 285.2 | | Deposit liabilities | 92.6 | 78.6 | | Other tax and social security liabilities | 126.0 | 84.9 | | Salaries and employee-related payables | 56.9 | 45.8 | | Contract liabilities (refer to Note 7) | 11.8 | 10.5 | | Other payables | 28.5 | 27.5 | | **Total trade and other payables** | **1,885.8** | **1,542.8** | The Group facilitates a supply chain financing programme under which the supplier can elect on an invoice-by-invoice basis to receive a discounted early payment from the partner bank or continue to be paid in line with the agreed payment terms; in either case the value and due date of the liability payable by the Group remain unchanged and, as such, the liability remains classified as trade and other payables. At 31 December 2021, invoices included in the programme amounted to €139.9 million (£2020: €90.9 million). Accrued liabilities regarding volume, marketing and promotional incentives as well as listing fees and other incentives provided to customers as at 31 December 2021 amounted to €239.9 million (£2020: €200.7 million). 183INTEGRATED ANNUAL REPORT 2021 ### 21. Provisions and employee benefits Provisions and employee benefits consisted of the following as at 31 December: 2021 2020 € million € million Current: Employee benefits 115.2 66.2 Restructuring provisions 23.6 26.0 Other provisions 18.4 7.4 Total current provisions and employee benefits 157.2 99.6 Non‑current: Employee benefits 115.5 110.8 Restructuring provisions 1.2 – Other provisions 2.1 2.5 Total non-current provisions and employee benefits 118.8 113.3 Total provisions and employee benefits 276.0 212.9 a) Provisions Accounting policy Provisions are recognised when: the Group has a present obligation (legal or constructive) as a result of a past event; it is probable that anoutflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made oftheamount of the obligation. Where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised asaseparate asset only when such reimbursement is virtually certain. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Termination benefits are payable whenever an employee’s employment is terminated before the normal retirement date or whenever anemployee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier ofthe following dates: a) when the Group can no longer withdraw the offer of those benefits; and b) when the Group recognises costs fora restructuring that is within the scope of IAS 37 ‘Provisions, contingent liabilities and contingent assets’ and involves the payment oftermination benefits (refer to Note 8). In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. The movements in restructuring and other provisions comprise: | | | 2021 | | | 2020 | | --- | --- | --- | --- | --- | --- | | | | € million | | | € million | | Restructuring | | | Restructuring | | | | | provision Other provisions | | | provision Other provisions | | As at 1 January 26.0 9.9 14.6 12.0 Arising during the year 21.7 13.5 21.5 4.9 Utilised during the year (21.5) (2.8) (9.2) (4.9) Unused amount reversed (1.4) (0.1) (0.6) (1.9) Foreign currency translation – – (0.3) (0.2) As at 31 December 24.8 20.5 26.0 9.9 Other provisions primarily comprise provisions in relation to employee litigation and legal provisions. 184 COCA-COLA HBC # Notes to the consolidated financial statements *continued* ## 21. Provisions and employee benefits *continued* ### b) Employee benefits #### Accounting policies The Group operates a number of defined benefit and defined contribution pension plans in its territories. The defined benefit plans are made up of both funded and unfunded pension plans and employee leaving indemnities. The assets of funded plans are generally held in separate trustee-administered funds and are financed by payments from employees and/or the relevant Group companies. The liability recognised in the balance sheet in respect of defined benefit plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of the plan assets. For defined benefit pension plans, pension costs are assessed using the projected unit credit method. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Such actuarial gains and losses are not reclassified to the income statement in subsequent periods. The defined benefit obligations are measured at the present value of the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used. Past service cost is recognised immediately in the income statement. A number of the Group's operations have other long-service benefits in the form of jubilee plans. These plans are measured at the present value of the estimated future cash outflows with immediate recognition of actuarial gains and losses in the income statement. The Group's contributions to the defined contribution pension plans are charged to the income statement in the period to which the contributions relate. #### Critical accounting estimates The Group provides defined benefit pension plans as an employee benefit in certain territories. Determining the value of these plans requires several actuarial assumptions and estimates about discount rates, future salary increases and future pension increases. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. Employee benefits consisted of the following as at 31 December: | | 2021 € million | 2020 € million | | --- | --- | --- | | Defined benefit plans: | | | | Employee leaving indemnities | 78.9 | 72.2 | | Pension plans | 6.2 | 7.7 | | Long-service benefits (jubilee plans) and other benefits | 12.1 | 12.0 | | **Total defined benefit plans** | **97.2** | **91.9** | | Other employee benefits: | | | | Annual leave | 9.7 | 4.4 | | Other employee benefits | 123.8 | 80.7 | | **Total other employee benefits** | **133.5** | **85.1** | | **Total employee benefits obligations** | **230.7** | **177.0** | Other employee benefits primarily comprise employee bonuses which are linked to business and individual performance metrics. Employees of Coca-Cola HBC's subsidiaries in Austria, Bulgaria, Croatia, Greece, Italy, Montenegro, Nigeria, Poland, Romania, Serbia and Slovenia are entitled to employee leaving indemnities, generally based on each employee's length of service, employment category and remuneration. These are unfunded plans where the Company meets the payment obligation as it falls due. Coca-Cola HBC's subsidiaries in Austria, Northern Ireland, the Republic of Ireland and Switzerland sponsor defined benefit pension plans. Of the three plans in the Republic of Ireland, two have plan assets, as do the two plans in Northern Ireland, and one plan out of the three in Switzerland. The Austrian plans do not have plan assets and the Company meets the payment obligation as it falls due. The defined benefit plans in Austria, Republic of Ireland and Northern Ireland are closed to new members. Coca-Cola HBC provides long-service benefits in the form of jubilee plans to its employees in Austria, Croatia, Nigeria, Poland, Serbia, Slovenia and Switzerland. Defined benefit obligation by segment is as follows for the years ended 31 December: ![img-32.jpeg](img-32.jpeg) The average duration of the defined benefit obligations is 18 years and the total employer contributions expected to be paid in 2022 are €10.4 million. INTEGRATED ANNUAL REPORT 2021 189 The reconciliation of plan assets and plan liabilities for the years ended 31 December is as follows: | | Plan assets € million | Plan liabilities € million | Net (deficit) / net due € million | | --- | --- | --- | --- | | **As at 1 January 2020** | **458.2** | **(532.9)** | **(74.7)** | | Current service cost | – | (9.9) | (9.9) | | Past service cost | – | 9.1 | 9.1 | | Administrative expenses | (0.2) | – | (0.2) | | Curtailment/settlement | (3.2) | 2.5 | (0.7) | | Interest income/(expense) | 3.6 | (5.6) | (2.0) | | Actuarial losses | – | (0.4) | (0.4) | | **Total income/(expense) recognised in income statement** | **0.2** | **(4.3)** | **(4.1)** | | Loss from change in demographic assumptions | – | (6.1) | (6.1) | | Loss from change in financial assumptions | – | (35.0) | (35.0) | | Experience adjustments | – | 13.5 | 13.5 | | Return on plan assets excluding interest income | 26.9 | – | 26.9 | | **Total remeasurements recognised in other comprehensive income** | **26.9** | **(27.6)** | **(0.7)** | | Benefits paid | (24.8) | 24.7 | (0.1) | | Employer's contributions | 20.7 | – | 20.7 | | Participant's contributions | 4.9 | (4.9) | – | | Net increase in defined benefit obligation from other movements | – | (0.3) | (0.3) | | Foreign currency translation | (4.8) | 7.2 | 2.4 | | **As at 31 December 2020** | **481.3** | **(538.1)** | **(56.8)** | | Current service cost | – | (10.8) | (10.8) | | Past service cost | – | (1.6) | (1.6) | | Administrative expenses | (0.3) | – | (0.3) | | Curtailment/settlement | (16.4) | 14.2 | (2.2) | | Interest income/(expense) | 2.3 | (4.0) | (1.7) | | Actuarial gains | – | 0.6 | 0.6 | | **Total expense recognised in income statement** | **(14.4)** | **(1.6)** | **(16.0)** | | Gain from change in demographic assumptions | – | 1.4 | 1.4 | | Gain from change in financial assumptions | – | 16.0 | 16.0 | | Experience adjustments | – | (2.4) | (2.4) | | Return on plan assets excluding interest income | 34.6 | – | 34.6 | | **Total remeasurements recognised in other comprehensive income** | **34.6** | **15.0** | **49.6** | | Benefits paid | (23.1) | 23.1 | – | | Employer's contributions | 16.4 | – | 16.4 | | Participant's contributions | 4.6 | (4.6) | – | | Net increase in defined benefit obligation from other movements | – | (0.7) | (0.7) | | Foreign currency translation | 20.0 | (19.4) | 0.6 | | **As at 31 December 2021** | **519.4** | **(526.3)** | **(6.9)** | The effect of the asset ceiling on plan assets and net deficit for the years ended 31 December is as follows: | | 2021 € million | 2020 € million | | --- | --- | --- | | **Fair value of plan assets at 1 January excluding asset ceiling** | **519.4** | **481.3** | | Opening unrecognised asset due to the asset ceiling | (14.1) | (2.3) | | Change in asset ceiling recognised in other comprehensive income | (33.5) | (11.8) | | Exchange rate gain | (0.7) | – | | **Fair value of plan assets at 31 December including asset ceiling** | **471.1** | **467.2** | | | 2021 € million | 2020 € million | | Present value of funded obligations | 434.1 | 452.6 | | Fair value of plan assets | (519.4) | (481.3) | | **Defined benefit obligations of funded plans** | **(85.3)** | **(28.7)** | | Present value of unfunded obligations | 92.2 | 85.5 | | Unrecognised asset due to asset ceiling | 48.3 | 14.1 | | **Defined benefit obligations** | **55.2** | **70.9** | | Plus: Amounts recognised within non-current assets (refer to Note 18) | 42.0 | 21.0 | | **Total defined benefit obligations** | **97.2** | **91.9** | 186 COCA-COLA HBC ### Notes to the consolidated financial statements continued ### 21. Provisions and employee benefits continued Funding levels are monitored, in conjunction with the agreed contribution rate. The funding level of the funded plans as at 31 December 2021 was 109% (2020: 103%). Five of the plans have funded status surplus totalling €42.0 million as at 31 December 2021 (2020: five plans, totalling €21.0 million) that isrecognised as an asset on the basis that the Group has an unconditional right to future economic benefits either via a refund or a reduction infuture contributions. Defined benefit plan expense is included in employee costs and presented in cost of goods sold and operating expenses. The assumptions (weighted average for the Group) used in computing the defined benefit obligation comprised the following for the years ended 31 December: 2021 2020 % % Discount rate 1.2 0.7 Rate of compensation increase 2.5 2.2 Rate of pension increase 1.0 0.8 Life expectancy for pensioners at the age of 65 in years: Male 22 22 Female 24 24 Asset liability matching: Plan assets allocated to growth assets are monitored regularly to ensure they remain appropriate and in line with the Group’s long-term strategy to manage the plans. As the plans mature, the level of investment risk will be reduced by investing more in assets such as bonds that better match the liabilities. Pension plan assets are invested in different asset classes in order to maintain a balance between risk and return. Investments are well diversified to limit the financial effect of the failure of any individual investment. Through its defined benefit plans the Group is exposed toanumber of risks, as outlined below: • Asset volatility: The liabilities are calculated using a discount rate set with reference to corporate bond yields; if assets underperform thisyield, a deficit will be created. The Northern Ireland, Republic of Ireland and Swiss plans hold a significant proportion of growth assets (equities) which are expected to outperform corporate bonds in the long term while being subject to volatility and risk in the short term. • Changes in bond yields: A decrease in corporate bond yields will increase the plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings. Conversely an increase in corporate bond yields will decrease the plan liabilities, although this will be partially offset by a decrease in the value of the plans’ bond holdings. • Inflation: The Northern Ireland, Republic of Ireland and Swiss plans’ benefit obligations are linked to inflation, and higher inflation will lead tohigher liabilities (although, in most cases, caps on the level of inflationary increases are in place to protect against extreme inflation). Themajority of the assets are either unaffected by or only loosely correlated with inflation, meaning that an increase in inflation will also increase the deficit. • Life expectancy: The majority of the pension plans’ obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the liabilities. The sensitivity analysis presented below is based on a change in an individual assumption while all other assumptions remain constant. Impact on defined benefit obligation as at 31 December 2021 Change in Increase in Decrease in assumptions assumption assumption Discount rate 50bps 8.2% 9.4% | Rate of compensation increase 50bps | 1.8% 1.5% | | --- | --- | | Rate of pension increase 50bps | 5.2% 4.9% | | Life expectancy 1 year | 2.8% 2.8% | 187INTEGRATED ANNUAL REPORT 2021 Plan assets are invested as follows: Assets category 2021 (%) Assets category 2020 (%) | Equity securities – Eurozone | 3% | Equity securities – Eurozone | 3% | | --- | --- | --- | --- | | Equity securities – Non-Eurozone | 22% | Equity securities – Non-Eurozone | 25% | | Government bonds – Eurozone | 30% | Government bonds – Eurozone | 27% | | Corporate bonds – Eurozone | 10% | Corporate bonds – Eurozone | 4% | | Corporate bonds – Non-Eurozone | 10% | Corporate bonds – Non-Eurozone | 16% | | Real estate | 11% | Real estate | 11% | | Cash | 1% | Cash | 1% | | Other | 13% | Other | 13% | The assets of funded plans are generally held in separately administered trusts, either as specific assets or as a proportion of a general fund, or are insurance contracts. Plan assets held in trust are governed by local regulations and practice in each country. The category ‘Other’ mainly includes investments in funds holding a portfolio of assets. Plan assets relate predominantly to quoted financial instruments. Equity securities were not invested in ordinary shares of the Company as at 31 December 2021 or 31 December 2020. Defined contribution plans The expense recognised in the income statement in 2021 for the defined contribution plans is €19.4 million (2020: €18.8 million). Thisisincluded in employee costs and recorded in cost of goods sold and operating expenses. ### 22. Offsetting financial assets and financial liabilities Accounting policy The Group offsets financial assets and financial liabilities to the net amount reported in the balance sheet when it currently has a legally enforceable right to offset the recognised amounts and it intends to settle on a net basis or to realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course ofbusiness and in the event of default, insolvency or bankruptcy of the Company or the counterparty. The Group enters into derivative transactions under International Swaps and Derivatives Association (ISDA) master netting agreements or other similar agreements. In general, under such agreements the counterparties can elect to settle as one single net amount the aggregated amounts owed by each counterparty on a single day with respect to all outstanding transactions of the same currency and the same type ofderivative. In the event of default or early termination, all outstanding transactions under the agreement are terminated and subject to any set-off. These agreements do not meet all of the IAS 32 criteria for offsetting in the balance sheet as the Group does not have any current legally enforceable right to offset amounts since the right can only be applied if elected by both counterparties. The financial assets and financial liabilities presented below are subject to offsetting, enforceable master netting or similar agreements. Thecolumn ‘Net amount’ shows the impact on the Group’s balance sheet assuming all set‑off rights are exercised. Financial liabilities offset against trade receivables mainly relate to accrued customer rebates. 188 COCA-COLA MBC # Notes to the consolidated financial statements*continued* # **22. Offsetting financial assets and financial liabilities***continued* # **a) Financial assets** As at 31 December 2021 | | Gross amounts of recognised financial assets € million | Gross amounts of recognised financial liabilities set off in the balance sheet € million | Net amounts of financial assets presented in the balance sheet € million | Related amounts not set off in the balance sheet Financial instruments € million | Net amount € million | | --- | --- | --- | --- | --- | --- | | Derivative financial assets | 48.2 | – | 48.2 | (8.1) | 40.1 | | Cash and cash equivalents | 782.8 | – | 782.8 | – | 782.8 | | Other financial assets (excluding loans to related parties and derivatives) | 834.9 | – | 834.9 | – | 834.9 | | Trade receivables | 764.0 | (58.5) | 705.5 | – | 705.5 | | **Total** | **2,429.9** | **(58.5)** | **2,371.4** | **(8.1)** | **2,363.3** | As at 31 December 2020 | | Gross amounts of recognised financial assets € million | Gross amounts of recognised financial liabilities set off in the balance sheet € million | Net amounts of financial assets presented in the balance sheet € million | Related amounts not set off in the balance sheet Financial instruments € million | Net amount € million | | --- | --- | --- | --- | --- | --- | | Derivative financial assets | 16.2 | – | 16.2 | (0.7) | 15.5 | | Cash and cash equivalents | 1,215.8 | – | 1,215.8 | – | 1,215.8 | | Other financial assets (excluding loans to related parties and derivatives) | 92.9 | – | 92.9 | – | 92.9 | | Trade receivables | 611.0 | (52.3) | 558.7 | – | 558.7 | | **Total** | **1,935.9** | **(52.3)** | **1,883.6** | **(0.7)** | **1,882.9** | # **b) Financial liabilities** As at 31 December 2021 | | Gross amounts of recognised financial liabilities € million | Gross amounts of recognised financial assets set off in the balance sheet € million | Net amounts of financial liabilities presented in the balance sheet € million | Related amounts not set off in the balance sheet Financial instruments € million | Net amount € million | | --- | --- | --- | --- | --- | --- | | Derivative financial liabilities | 14.6 | – | 14.6 | (8.1) | 6.5 | | Trade payables | 736.8 | (58.5) | 678.3 | – | 678.3 | | **Total** | **751.4** | **(58.5)** | **692.9** | **(8.1)** | **684.8** | As at 31 December 2020 | | Gross amounts of recognised financial liabilities € million | Gross amounts of recognised financial assets set off in the balance sheet € million | Net amounts of financial liabilities presented in the balance sheet € million | Related amounts not set off in the balance sheet Financial instruments € million | Net amount € million | | --- | --- | --- | --- | --- | --- | | Derivative financial liabilities | 11.3 | – | 11.3 | (0.7) | 10.6 | | Trade payables | 635.5 | (52.3) | 583.2 | – | 583.2 | | **Total** | **646.8** | **(52.3)** | **594.5** | **(0.7)** | **593.8** | INTEGRATED ANNUAL REPORT 2021 189 ## 23. Business combinations ### Accounting policy The acquisition method of accounting is used to account for business combinations. The consideration transferred is the fair value of any asset transferred, shares issued and liabilities assumed. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed are measured initially at their fair values at the acquisition date. The excess of the consideration transferred and the fair value of non-controlling interest over the net assets acquired and liabilities assumed is recorded as goodwill. Acquisition costs comprise costs incurred to effect a business combination, such as finder's, advisory, legal, accounting, valuation and other professional or consulting fees. Integration costs comprise direct incremental costs necessary for the acquiree to operate within the Group. All acquisition and integration-related costs are expensed as incurred. For each business combination, the Group elects to measure the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets. Refer also to Note 2 for accounting policy regarding basis of consolidation. On 31 October 2021, the Group acquired a self-serve coffee vending business in Poland (the 'Costa Express Business'). The acquisition was of a group of assets that constituted a business, which have been integrated into the Group's operations in Poland. Consideration paid for the acquisition amounted to €5.6 million and is included in the line 'Payments for business combinations' of the consolidated cash flow statement. As a result of the above acquisition, other intangible assets of €3.1 million, goodwill of €1.0 million and property, plant and equipment of €1.3 million were recorded in the Group's Developing segment (refer to Note 13 and Note 14 respectively). Acquisition-related costs of €0.4 million were included in the 2021 operating expenses, as a result of the above acquisition (refer to Note 8). In addition, acquisition and integration costs of €13.9 million incurred in 2021 regarding the acquisition of Coca-Cola Bottling Company of Egypt S.A.E. (refer to Note 8 and Note 31) were included in operating expenses. ## 24. Financial risk management and financial instruments ### Accounting policies #### Financial assets On initial recognition, financial assets are recorded at fair value plus, in the case of financial assets not at fair value through profit or loss (FVTPL), any directly attributable transaction costs. Transaction costs of financial assets at FVTPL are expensed. Financial assets are classified into three categories: a) Financial assets at amortised cost (debt instruments) The classification of debt instruments at amortised cost depends on two criteria: a) the Group's business model for managing assets and b) whether the instruments' contractual cash flows represent solely payments for principal and interest on the principal amount outstanding (the 'SPPI criterion'). If both criteria are met, the financial assets of the Group are subsequently measured at amortised cost whereby any interest income is recognised using the effective interest method. This category includes trade receivables, treasury bills and time deposits. The accounting policy for trade receivables is described in Note 18. b) Financial assets through other comprehensive income (FVOCI) The Group also has investments in financial assets at FVOCI. These include equity investments that are not of a trading nature and which are subsequently recorded at fair value. The Group intends to hold these equity instruments for the foreseeable future and has irrevocably elected to classify them as FVOCI upon initial recognition. Subsequently, there is no recycling of gains or losses to profit or loss on derecognition. c) Financial assets through profit or loss (FVTPL) The Group also has investments in financial assets at FVTPL which are subsequently measured at fair value and where changes in fair value are recognised in the income statement. Financial assets at FVTPL mainly comprise money market funds. For those financial assets that are not subsequently held at fair value, the Group assesses whether there is evidence of impairment at each balance sheet date. #### Derivative financial instruments The Group uses derivative financial instruments, including currency, commodity and interest rate derivatives, to manage currency, commodity price and interest rate risk associated with the Group's underlying business activities. The Group does not enter into derivative financial instruments for trading activity purposes. All derivative financial instruments are initially recognised on the balance sheet at fair value and are subsequently remeasured at their fair value. Changes in the fair value of derivative financial instruments are recognised at each reporting date either in the income statement or in equity, depending on whether the derivative financial instrument qualifies for hedge accounting as a cash flow hedge. Embedded derivatives in financial host contracts are recorded at fair value through profit or loss together with the host contracts. All derivative financial instruments that are not part of an effective hedging relationship (undesignated hedges) are classified as assets or liabilities at fair value through profit or loss. 190 COCA-COLA HBC ### Notes to the consolidated financial statements continued ### 24. Financial risk management and financial instruments continued Accounting policies continued Derivative financial instruments continued At the inception of a hedge transaction, the Group documents the relationship between the hedging instrument and the hedged item, aswell as its risk management objective and strategy for undertaking the hedge transaction. This process includes linking the derivative financial instrument designated as a hedging instrument to the specific asset, liability, firm commitment or forecast transaction. TheGroup has established a hedge ratio of 1:1 for the hedging relationships as the underlying risks of the hedging instruments are identical to the hedged risks component. The economic relationship between the hedged item and the hedging instrument is assessed on an ongoing basis. Ineffectiveness may arise if the timing or the notional value of the forecast transaction changes or if the credit risk changes, impacting the fair value movements of the hedging instruments. Changes in the fair value of derivative financial instruments (both the intrinsic value and the aligned time value) that are designated and effective as hedges of future cash flows are recognised directly in other comprehensive income and the ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are recycled to the income statement as the related hedged asset acquired or liability assumed affects the income statement. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the income statement. Derivatives embedded in non‑financial host contracts are accounted for as separate derivatives and recorded at fair value if: • their economic characteristics and risks are not closely related to those of the host contracts; • the host contracts are not designated as at fair value through profit or loss; and • a separate instrument with the same terms as the embedded derivative meets the definition of a derivative. These embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occursifthere is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required, orareclassification of a financial asset out of the fair value through profit or loss. Regular purchases and sales of investments are recognised on the trade date, which is the day the Group commits to purchase or sell. The investments are recognised initially at fair value plus transaction costs, except in the case of FVTPL. For investments traded in active markets, fair value is determined by reference to stock exchange quoted bid prices. For other investments, fair value is estimated by reference to the current market value of similar instruments or by reference to the discounted cash flows of the underlying net assets. Financial risk factors The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, commodity price risk and interest rate risk), credit risk, liquidity risk and capital risk. The Group’s overall risk management programme focuses on the volatility of financial markets and seeks to minimise potential adverse effects on the Group’s cash flows. The Group uses derivative financial instruments to hedge certain risk exposures. Risk management is carried out by Group Treasury in a controlled manner, consistent with the Board of Directors’ approved policies. Group Treasury identifies, evaluates and hedges financial risks in close co‑operation with the Group’s subsidiaries. The Board ofDirectors has approved the Treasury Policy which provides the control framework for all treasury and treasury‑related transactions. Market risk a) Foreign currency risk The Group is exposed to the effect of foreign currency risk on future transactions, recognised monetary assets and liabilities that are denominated in currencies other than the local entity’s functional currency, as well as net investments in foreign operations. Foreign currency forward, option and futures contracts are used to hedge a portion of the Group’s foreign currency risk. The majority of the foreign currency forward, option and futures contracts have maturities of less than one year after the balance sheet date. Management has set up a policy that requires Group companies to manage their foreign exchange risk against their functional currency. Tomanage their foreign exchange risk arising from future transactions and recognised monetary assets and liabilities, entities in the Group use foreign currency forward, option and future contracts transacted by Group Treasury. Group Treasury’s risk management policy is to hedge, on an average coverage ratio basis, between 25% and 80% of anticipated cash flows for the next 12 months by using a layer strategy, and 100% of balance sheet remeasurement risk in each major foreign currency for which hedging is applicable. Each subsidiary designates contracts with Group Treasury as fair value hedges or cash flow hedges, as appropriate. External foreign exchange contracts are designated at Group level as hedges of foreign exchange risk on specific monetary assets, monetary liabilities or future transactions on a gross basis. The impact of COVID-19 has been considered, in relation to the Group’s cash flow hedges, in determining that the hedged forecast cash flows remain highly probable for the next 12 months. The following tables present details of the Group’s sensitivity to reasonably possible increases and decreases in the Euro and US Dollar against the relevant foreign currencies. In determining reasonable possible changes, the historical volatility over a 12-month period of the respective foreign currencies in relation to the Euro and the US Dollar has been considered. The sensitivity analysis determines the potential gains and losses in the income statement or equity arising from the Group’s foreign exchange positions as a result of the corresponding percentage increases and decreases in the Group’s main foreign currencies relative to the Euro and the US Dollar. The sensitivity analysis includes outstanding foreign-currency-denominated monetary items, external loans, and loans between operations within the Group where the denomination of the loan is in a currency other than the functional currency of the local entity. 191INTEGRATED ANNUAL REPORT 2021 2021 exchange risk sensitivity to reasonably possible changes in the Euro against relevant other currencies | | | Euro strengthens against | | | Euro weakens against | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | local currency | | | local currency | | | | | Loss/(gain) | | | (Gain)/loss | | | | | % historical | in income | | (Gain)/loss | in income | | Loss/(gain) | | volatility over a | | statement | | in equity | statement | | in equity | | 12-month period | | | € million | € million | € million | | € million | Nigerian Naira 16.03% 6.2 – (8.5) – Russian Rouble 9.90% (0.7) (0.2) 0.9 0.3 UK Sterling 5.23% 0.9 – (1.0) – Ukrainian Hryvnia 6.80% 0.3 – (0.2) – Other – (0.2) (1.5) (0.2) 1.7 Total 6.5 (1.7) (9.0) 2.0 2021 exchange risk sensitivity to reasonably possible changes in the US Dollar against relevant other currencies | | | US Dollar strengthens against | | | | US Dollar weakens against | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | local currency | | | local currency | | | | | | (Gain)/loss | | | Loss/(gain) | | | | | % historical | | in income | | (Gain)/loss | in income | | Loss/(gain) | | volatility over a | | | statement | | in equity | statement | | in equity | | 12-month period | | | € million | | € million | | € million | € million | Euro 5.72% (1.8) – 2.0 – Nigerian Naira 5.89% 0.6 – (0.5) – Russian Rouble 9.86% 0.1 (3.2) (0.1) 3.9 Other – (0.4) – 0.4 – Total (1.5) (3.2) 1.8 3.9 2020 exchange risk sensitivity to reasonably possible changes in the Euro against relevant other currencies | | | Euro strengthens against | | | Euro weakens against | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | local currency | | | local currency | | | | | Loss/(gain) | | | (Gain)/loss | | | | | % historical | in income | | (Gain)/loss | in income | | Loss/(gain) | | volatility over a | | statement | | in equity | statement | | in equity | | 12-month period | | | € million | € million | € million | | € million | Nigerian Naira 12.39% 0.6 – (0.8) – Russian Rouble 21.02% 1.0 (0.7) (1.4) 1.1 UK Sterling 8.91% (0.2) 0.7 0.4 (0.9) Ukrainian Hryvnia 10.48% 0.6 – (0.7) – Other – (1.2) (3.2) 1.4 3.6 Total 0.8 (3.2) (1.1) 3.8 2020 exchange risk sensitivity to reasonably possible changes in the US Dollar against relevant other currencies | | | US Dollar strengthens against | | | | US Dollar weakens against | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | local currency | | | local currency | | | | | | Loss/(gain) | | | (Gain)/loss | | | | | % historical | | in income | | (Gain)/loss | in income | | Loss/(gain) | | volatility over a | | | statement | | in equity | statement | | in equity | | 12-month period | | | € million | | € million | | € million | € million | Euro 7.57% 2.0 – (2.3) – Nigerian Naira 13.23% 5.0 – (6.6) – Russian Rouble 19.48% – (3.9) (0.1) 5.7 Other – (0.2) – 0.3 – Total 6.8 (3.9) (8.7) 5.7 b) Commodity price risk The Group is affected by the volatility of certain commodity prices (being mainly sugar, aluminium, aluminium premium, plastic and gas oil) inrelation to certain raw materials necessary for the production of the Group’s products. Due to the significantly increased volatility of commodity prices, the Group’s Board of Directors has developed and enacted a risk management strategy regarding commodity price risk and its mitigation. Although the Group continues to contract prices with suppliers in advance, to reduce its exposure to the effect of short-term changes in the price of sugar, aluminium, aluminium premium, gas oil and plastic, the Group hedges the market price of sugar, aluminium, aluminium premium, plastic and gas oil using commodity swap contracts based on arolling forecast for a period up to 36 months. Group Treasury’s risk management policy is to hedge a minimum of 25% and a maximum of80% of commodity exposure for the next 12 months, with the exception of certain types of plastic for which lower compliance ratios apply. The following table presents details of the Group’s income statement and equity sensitivity to increases and decreases in sugar, aluminium, aluminium premium, plastic and gas oil prices. The table does not show the sensitivity to the Group’s total underlying commodity exposure orthe impact of changes in volumes that may arise from an increase or decrease in the respective commodity prices. The sensitivity analysis determines the potential effect on profit or loss and equity arising from the Group’s commodity swap contract positions as a result of the reasonably possible increases or decreases of the respective commodity prices. 192 COCA-COLA HBC ### Notes to the consolidated financial statements continued ### 24. Financial risk management and financial instruments continued 2021 commodity price risk sensitivity to reasonably possible changes in the price of relevant commodities | | | | Commodity price increases with | | | Commodity price decreases with | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | all other variables held constant | | | all other variables held constant | | | | | | % historical | | (Gain)/loss | | | Loss/(gain) | | | | volatility over a | | | in income | (Gain)/loss | | in income | Loss/(gain) | | 12-month period per | | | | statement | in equity | | statement | in equity | | | contract maturity | | | € million | € million | | € million | € million | Sugar 20.8% (0.4) (22.6) 0.4 22.6 Aluminium 24.1% (0.8) (19.8) 0.8 19.8 Aluminium premium 46.1% (0.2) (3.0) 0.2 3.0 Gas oil 31.3% – (5.6) – 5.6 Plastic 27.0% (25.7) – 25.7 – Total (27.1) (51.0) 27.1 51.0 2020 commodity price risk sensitivity to reasonably possible changes in the price of relevant commodities | | | | Commodity price increases with | | | Commodity price decreases with | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | all other variables held constant | | | all other variables held constant | | | | | | % historical | | (Gain)/loss | | | Loss/(gain) | | | | volatility over a | | | in income | (Gain)/loss | | in income | Loss/(gain) | | 12-month period per | | | | statement | in equity | | statement | in equity | | | contract maturity | | | € million | € million | | € million | € million | Sugar 20.1% (0.2) (13.1) 0.2 13.1 Aluminium 16.6% (0.4) (6.7) 0.4 6.7 Aluminium premium 43.4% – (0.7) – 0.7 Gas oil 59.8% – (5.6) – 5.6 Plastic 26.3% (8.9) – 8.9 – Total (9.5) (26.1) 9.5 26.1 c) Interest rate risk The sensitivity analysis in the following table has been determined based on exposure to interest rates of both derivative and non-derivative instruments existing at the balance sheet date and assuming constant foreign exchange rates. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the balance sheet date was outstanding for the whole year. A 50 basis point increase ordecrease for 2021 (2020: 50 basis point) represents management’s assessment of a reasonably possible change in interest rates. Interest rate risk sensitivity to reasonably possible changes in interest rates Loss/(gain) in income statement 2021 2020 € million € million Increase in basis points 0.2 0.4 Decrease in basis points (0.2) (0.4) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its obligations under thecontract or arrangement. The Group has limited concentration of credit risk across trade and financial counterparties. Credit policies arein place and the exposure to credit risk is monitored on an ongoing basis. The Group’s maximum exposure to credit risk in the event that counterparties fail to meet their obligations at 31 December 2021 in relation to each class of recognised financial assets is the carrying amount of those assets as indicated on the balance sheet. Under the credit policies, before accepting any new credit customers the Group investigates the potential customer’s credit quality, usingeither external agencies, in some cases bank references and/or historic experience, and defines credit limits for each customer. Customers that fail to meet the Group’s benchmark credit quality may transact with the Group only on a prepayment or cash basis. Customers are reviewed on an ongoing basis and credit limits are adjusted accordingly. There is no significant concentration of credit risk with regard to loans, trade and other receivables as the Group has a large number of customers who are geographically dispersed. The Group has policies that limit the amount of credit exposure to any single financial institution. The Group only undertakes investment andderivative transactions with banks and financial institutions that have a minimum credit rating of ‘BBB‑’ from Standard & Poor’s and ‘Baa3’ from Moody’s, unless the investment is in a country where the sovereign credit rating is below BBB‑/Baa3. The Group also uses credit default swaps of a counterparty in order to measure in a timelier way the creditworthiness of a counterparty and set up its counterparties in tiers in order to assign maximum exposure and tenor per tier. If the credit default swaps of a certain counterparty exceed 400 basis points the Group will stop trading derivatives with that counterparty and will try to cancel any deposits on a best-effort basis. In addition, the Group regularly makes use of time deposits, treasury bills and money market funds to invest excess cash balances and to diversify its counterparty risk. Asat31 December 2021, an amount of €423.9 million (2020: €795.5 million) is invested in time deposits, €6.2 million in treasury bills (2020: €nil) and €638.8 million (2020: €nil) in money market funds. INTEGRATED ANNUAL REPORT 2021 193 ## Liquidity risk The Group actively manages liquidity risk to ensure there are sufficient funds available for any short-term and long-term commitments. Bank overdrafts and bank facilities, both committed and uncommitted, are used to manage this risk. The Group manages liquidity risk by maintaining adequate cash reserves and committed banking facilities, access to the debt and equity capital markets, and by continuously monitoring forecast and actual cash flows. In Note 25, the undrawn facilities that the Group has at its disposal to manage liquidity risk are discussed under the headings 'Commercial paper programme' and 'Committed credit facilities'. This has been an area of focus during the COVID-19 pandemic; however, the Group maintains a healthy liquidity position and is able to meet its obligations as they fall due. As at 31 December 2021, the Group has net debt of €1.3 billion (refer to Note 25). There are no bond maturities until November 2024. In addition, the Group has an undrawn revolving credit facility of €800 million available, as well as €0.8 billion available of the €1.0 billion commercial paper facility. The following tables detail the remaining contractual maturities for financial liabilities. The tables include both interest and principal undiscounted cash flows, assuming that interest rates remain constant from 31 December 2021. | | Up to one year € million | One to two years € million | Two to five years € million | Over five years € million | Total € million | | --- | --- | --- | --- | --- | --- | | Borrowings | 365.2 | 48.4 | 707.3 | 1,875.2 | 2,996.1 | | Derivative liabilities | 11.6 | 3.0 | – | – | 14.6 | | Trade and other payables (excluding other tax & social security and contract liabilities) | 1,748.0 | 0.4 | 1.1 | 4.1 | 1,753.6 | | Leases | 58.9 | 43.2 | 62.9 | 29.6 | 194.6 | | **As at 31 December 2021** | **2,183.7** | **95.0** | **771.3** | **1,908.9** | **4,958.9** | | | Up to one year € million | One to two years € million | Two to five years € million | Over five years € million | Total € million | | Borrowings | 283.3 | 98.2 | 714.4 | 1,889.8 | 2,985.7 | | Derivative liabilities | 10.0 | 1.3 | – | – | 11.3 | | Trade and other payables (excluding other tax & social security and contract liabilities) | 1,447.4 | 0.3 | 1.0 | 4.9 | 1,453.6 | | Leases | 63.4 | 50.7 | 71.0 | 35.5 | 220.6 | | **As at 31 December 2020** | **1,804.1** | **150.5** | **786.4** | **1,930.2** | **4,671.2** | ## Capital risk The Group monitors its financial capacity and credit ratings by reference to a number of key financial ratios, including net debt to comparable adjusted EBITDA which provides a framework within which the Group's capital base is managed. This ratio is calculated as net debt divided by comparable adjusted EBITDA. Adjusted EBITDA is calculated by adding back to operating profit the depreciation and impairment of property, plant and equipment, the amortisation and impairment of intangible assets, the employee performance share costs and other non-cash items, if any. Comparable adjusted EBITDA refers to adjusted EBITDA excluding restructuring expenses, acquisition and integration costs and the unrealised gains or losses resulting from the mark-to-market valuation of derivatives and embedded derivatives related to commodity hedging. Refer to Note 25 for the definition of net debt. The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may increase or decrease debt, issue or buy back shares, adjust the amount of dividends paid to shareholders, or return capital to shareholders. The Group's goal is to maintain a conservative financial profile. This is evidenced by the credit ratings maintained with Standard & Poor's and Moody's, which were reaffirmed in 2021. | Rating agency | Publication date | Long-term debt | Outlook | Short-term debt | | --- | --- | --- | --- | --- | | Standard and Poor's | April 2021 | BBB+ | Stable | A2 | | Moody's | May 2021 | Baa1 | Stable | P2 | The Group's medium- to long-term target is to maintain the net debt to comparable adjusted EBITDA ratio within a 1.5 to 2.0 range. 194 COCA-COLA HBC # Notes to the consolidated financial statements*continued* # **24. Financial risk management and financial instruments***continued* The ratios as at 31 December were as follows: | | 2021 € million | 2020 € million | | --- | --- | --- | | **Net debt (refer to Note 25)** | **1,319.7** | **1,616.8** | | Operating profit | 799.3 | 660.7 | | Depreciation and impairment of property, plant and equipment, including right-of-use assets | 336.3 | 588.1 | | Amortisation of intangible assets | 1.0 | 0.9 | | Employee performance shares | 14.9 | 9.5 | | **Adjusted EBITDA** | **1,151.5** | **1,059.2** | | Other restructuring expenses (primarily redundancy costs) | 21.0 | 10.0 | | Unrealised (gain)/loss on commodity derivatives | (3.8) | 1.6 | | Acquisition and integration costs | 14.3 | — | | **Total comparable adjusted EBITDA** | **1,183.0** | **1,070.8** | | **Net debt/comparable adjusted EBITDA ratio** | **1.12** | **1.51** | The reconciliation of other restructuring expenses to total restructuring expenses for the years ended 31 December was as follows: | | 2021 € million | 2020 € million | | --- | --- | --- | | Total restructuring expenses included in operating expenses (refer to Note 8) | 21.2 | 9.8 | | Total restructuring expenses included in share of results of integral equity method investments | — | 0.2 | | Less: Impairment of property, plant and equipment | (0.2) | — | | **Other restructuring expenses (primarily redundancy costs)** | **21.0** | **10.0** | # **Hedging activity** The carrying amounts of the derivative financial instruments are included in the lines 'Other financial assets' and 'Other financial liabilities' of the consolidated balance sheet. # **a) Cash flow hedges** The impact of the hedging instruments on the consolidated balance sheet was: | As at 31 December 2021 | Notional amount € million | Carrying amount € million | Period of maturity date | | --- | --- | --- | --- | | **Contracts with positive fair values** | **182.6** | **40.4** | | | **Non-current** | **26.8** | **9.0** | | | Commodity swap contracts | 26.8 | 9.0 | Jan 23-Nov 23 | | **Current** | **155.8** | **31.4** | | | Foreign currency forward contracts | 48.3 | 1.3 | Jan 22-Aug 22 | | Commodity swap contracts | 107.5 | 30.1 | Jan 22-Dec 22 | | **Contracts with negative fair values** | **59.3** | **(1.2)** | | | **Non-current** | **2.5** | **(0.1)** | | | Commodity swap contracts | 2.5 | (0.1) | Jan 23-Nov 23 | | **Current** | **56.8** | **(1.1)** | | | Foreign currency forward contracts | 37.9 | (0.6) | Jan 22-Dec 22 | | Commodity swap contracts | 18.9 | (0.5) | Jan 22-Nov 22 | 195INTEGRATED ANNUAL REPORT 2021 Notional amount Carrying amount Period of As at 31 December 2020 € million € million maturity date Contracts with positive fair values 145.9 9.4 Non‑current 27.7 2.3 Commodity swap contracts 27.7 2.3 Jan 22-Nov 22 Current 118.2 7.1 Foreign currency forward contracts 62.1 1.1 Jan 21-Oct 21 Commodity swap contracts 56.1 6.0 Jan 21-Dec 21 Contracts with negative fair values 74.2 (3.3) Non‑current 0.5 – Commodity swap contracts 0.5 – Jan 22-Nov 22 Current 73.7 (3.3) Foreign currency forward contracts 44.0 (1.0) Jan 21-Jun 21 Commodity swap contracts 29.7 (2.3) Jan 21-Dec 21 The impact on the hedging reserve as a result of applying cash flow hedge accounting was: Spot component of Intrinsic value of Cost of hedging foreign currency foreign currency reserve of currency Commodity swap Interest rate forward contracts option contracts derivatives contracts swap contracts Total € million € million € million € million € million € million Opening balance 1 January 2020 (3.6) 0.7 (0.6) 0.2 (40.2) (43.5) Net gain of cash flow hedges 19.0 0.1 – (4.1) 7.7 22.7 Change in fair value of hedging instruments recognised in OCI 19.0 0.1 – (4.1) – 15.0 Reclassified to profit or loss – – – – 7.7 7.7 Cost of hedging recognised in OCI – – (2.2) – – (2.2) Reclassified to inventory cost (13.0) (0.5) 3.2 10.4 – 0.1 Appropriation of reserves (4.0) (0.3) 0.3 – – (4.0) Closing balance 31 December 2020 (1.6) – 0.7 6.5 (32.5) (26.9) Net gain of cash flow hedges 1.0 – – 60.8 7.7 69.5 Change in fair value of hedging instruments recognised in OCI 1.0 – – 60.8 – 61.8 Reclassified to profit or loss – – – – 7.7 7.7 Cost of hedging recognised in OCI – – (2.7) – – (2.7) Reclassified to inventory cost (0.8) – 2.4 (25.6) – (24.0) Closing balance 31 December 2021 (1.4) – 0.4 41.7 (24.8) 15.9 An amount of €4.0 million was reclassified from ‘Hedging reserve’ to ‘Other reserves’ during 2020, as a result of a change in the classification of Multon (refer to Note 15). The effect of the cash flow hedges in the consolidated income statement was: | | 2021 | | 2020 | | --- | --- | --- | --- | | Loss/(gain) | | Loss/(gain) | | | € million | | € million | | Net amount reclassified from other comprehensive income to cost of goods sold – – Net amount reclassified from other comprehensive income to finance costs 7.7 7.7 Total 7.7 7.7 There was no significant ineffectiveness on the cash flow hedges during the years ended 31 December 2021 and 2020. 196 COCA-COLA HBC ### Notes to the consolidated financial statements continued ### 24. Financial risk management and financial instruments continued b) Undesignated hedges The fair values of derivative financial instruments as at 31 December which economically hedge the Group’s risks and for which hedge accounting has not been applied were: Notional amount Carrying amount Period of As at 31 December 2021 € million € million maturity date Contracts with positive fair values 203.2 7.8 Current 203.2 7.8 Embedded derivatives 4.9 0.1 Jan 22-Aug 22 Foreign currency forward contracts 165.3 1.1 Jan 22-Nov 22 Commodity swap contracts 33.0 6.6 Jan 22-Dec 22 Contracts with negative fair values 431.3 (13.4) Non‑current 33.4 (2.9) Foreign currency future contracts 13.9 (0.6) Jan 23 Commodity swap contracts 19.5 (2.3) Jan 23-Nov 23 Current 397.9 (10.5) Foreign currency future contracts 94.7 (3.3) Apr 22-Oct 22 Foreign currency forward contracts 246.5 (2.6) Jan 22-Nov 22 Commodity swap contracts 56.7 (4.6) Jan 22-Nov 22 Notional amount Carrying amount Period of As at 31 December 2020 € million € million maturity date Contracts with positive fair values 191.7 6.8 Non‑current 16.1 0.4 Embedded derivatives 16.1 0.4 Jan21-Jun21 Current 175.6 6.4 Foreign currency forward contracts 62.9 1.3 Jan21-Sep21 Foreign currency future contracts 110.0 4.9 Jan21-Mar21 Commodity swap contracts 2.7 0.2 Jan21-Dec21 Contracts with negative fair values 241.2 (8.0) Non‑current 9.2 (1.3) Commodity swap contracts 9.2 (1.3) Jan22-Nov22 Current 232.0 (6.7) Foreign currency forward contracts 198.6 (2.2) Jan21-Sep21 Commodity swap contracts 33.4 (4.5) Jan21-Dec21 The effect of the undesignated hedges in the consolidated income statement was: | | 2021 | | 2020 | | --- | --- | --- | --- | | | Gain | Loss/(gain) | | | € million | | | € million | Net amount recognised in cost of goods sold (14.1) 15.1 Net amount recognised in operating expenses (4.4) (1.2) Total (18.5) 13.9 INTEGRATED ANNUAL REPORT 2021 197 # **Financial instruments' categories** Categories of financial instruments as at 31 December were as follows (in € million): **2021** | Assets | Debt financial assets at amortised cost | Assets at FVTPL | Derivatives designated as hedging instruments | Equity financial assets at FVOCI | Total current and non-current | Analysis of total assets | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | Current | Non-current | | Investments including loans to related parties | 204.9 | 638.8 | – | 3.6 | 847.3 | 839.7 | 7.6 | | Derivative financial instruments | – | 7.8 | 40.4 | – | 48.2 | 39.2 | 9.0 | | Trade and other receivables | 863.3 | – | – | – | 863.3 | 862.2 | 1.1 | | Cash and cash equivalents | 782.8 | – | – | – | 782.8 | 782.8 | – | | **Total** | **1,851.0** | **646.6** | **40.4** | **3.6** | **2,541.6** | **2,523.9** | **17.7** | | Liabilities | Liabilities held at amortised cost | Liabilities at FVTPL | Derivatives designated as hedging instruments | Total current and non-current | Analysis of total liabilities | | | --- | --- | --- | --- | --- | --- | --- | | | | | | | Current | Non-current | | Trade and other payables (excluding other tax & social security and contract liabilities) | 1,753.6 | – | – | 1,753.6 | 1,748.0 | 5.6 | | Borrowings | 2,937.4 | – | – | 2,937.4 | 381.7 | 2,555.7 | | Derivative financial instruments | – | 13.4 | 1.2 | 14.6 | 11.6 | 3.0 | | **Total** | **4,691.0** | **13.4** | **1.2** | **4,705.6** | **2,141.3** | **2,564.3** | **2020** | Assets | Debt financial assets at amortised cost | Assets at FVTPL | Derivatives designated as hedging instruments | Equity financial assets at FVOCI | Total current and non-current | Analysis of total assets | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | Current | Non-current | | Investments including loans to related parties | 100.8 | – | – | 3.6 | 104.4 | 93.1 | 11.3 | | Derivative financial instruments | – | 6.8 | 9.4 | – | 16.2 | 13.5 | 2.7 | | Trade and other receivables | 689.8 | – | – | – | 689.8 | 688.4 | 1.4 | | Cash and cash equivalents | 1,215.8 | – | – | – | 1,215.8 | 1,215.8 | – | | **Total** | **2,006.4** | **6.8** | **9.4** | **3.6** | **2,026.2** | **2,010.8** | **15.4** | | Liabilities | Liabilities held at amortised cost | Liabilities at FVTPL | Derivatives designated as hedging instruments | Total current and non-current | Analysis of total liabilities | | | --- | --- | --- | --- | --- | --- | --- | | | | | | | Current | Non-current | | Trade and other payables (excluding other tax & social security and contract liabilities) | 1,453.6 | – | – | 1,453.6 | 1,447.4 | 6.2 | | Borrowings | 2,925.5 | – | – | 2,925.5 | 315.2 | 2,610.3 | | Derivative financial instruments | – | 8.0 | 3.3 | 11.3 | 10.0 | 1.3 | | **Total** | **4,379.1** | **8.0** | **3.3** | **4,390.4** | **1,772.6** | **2,617.8** | 198 COCA-COLA HBC ## Notes to the consolidated financial statements *continued* ### 24. Financial risk management and financial instruments *continued* #### Interest rate swap contracts The Group entered into forward starting swap contracts of €500.0 million in 2014 to hedge the interest rate risk related to its Euro-denominated forecast issuance of fixed rate debt in March 2016. In August 2015, the Group entered into additional forward starting swap contracts of €100.0 million. In March 2016 the forward starting swap contracts were settled and at the same time a new note was issued. The accumulated loss of €55.4 million recorded in other comprehensive income is being amortised to the income statement over the term of the new note (refer to Note 25). The Group entered into swaption contracts of €350.0 million in 2018 and €1,050.0 million in 2019 to hedge the interest rate risk related to its Euro-denominated forecast issuance of fixed rate debt in 2019, and formally designated these contracts as cash flow hedges. In May and November 2019, the swaption contracts were settled and, at the same time, new notes were issued. The accumulated loss of €9.6 million recorded in other comprehensive income is being amortised to the income statement over the relevant period. #### Embedded derivatives During 2015, the Group recognised embedded derivatives whose risks and economic characteristics were not considered to be closely related to the commodity contract in which they were embedded. The fair value of the embedded derivatives as at 31 December 2021 amounted to a financial asset of €0.1 million (2020: €0.4 million). #### Fair values of financial assets and liabilities For financial instruments such as cash, deposits, debtors and creditors, investments, loans payable to related parties, short-term borrowings (excluding the current portion of bonds and notes payable) and other financial liabilities (other than bonds and notes payable), carrying values are a reasonable approximation of the fair values. According to the fair value hierarchy, the financial instruments measured at fair value are classified as follows: ##### Level 1 The fair value of FVOCI listed equity securities as well as FVTPL securities is based on quoted market prices at the reported date. The fair value of bonds is based on quoted market prices at the reported date. ##### Level 2 The fair value of foreign currency forward, option and futures contracts, commodity swap contracts, bonds and notes payable, interest rate swap contracts, forward starting swap contracts and embedded foreign currency derivatives is determined by using valuation techniques. These valuation techniques maximise the use of observable market data. The fair value of the foreign currency forward, option and futures contracts, commodity swap contracts, embedded foreign currency derivatives and cross-currency swap contracts is calculated by reference to quoted forward exchange, deposit rates and forward rate curves of the underlying commodity at the reported date for contracts with similar maturity dates. The fair value of interest rate option contracts is calculated by reference to the Black-Scholes valuation model and implied volatilities. The fair value of interest rate swap contracts is determined as the difference in the present value of the future interest cash inflows and outflows based on observable yield curves. ##### Level 3 The fair value of FVOCI unlisted equity securities as well as certain undesignated derivatives and foreign currency futures contracts is determined through the use of estimated discounted cash flows or other valuation techniques. These valuation techniques estimate the fair value of undesignated derivatives using settlement and forward prices received from counterparty banks and subscription-based publications, and the fair value of foreign currency futures contracts by using adjusted quoted prices. Any transfers between levels of the fair value hierarchy are deemed to have occurred at the date of the event or change in circumstances that caused the transfer. INTEGRATED ANNUAL REPORT 2021 199 The following table sets out the fair value hierarchy levels into which fair value measurements are categorised for assets and liabilities measured at fair value as at 31 December 2021: | | Level 1 € million | Level 2 € million | Level 3 € million | Total € million | | --- | --- | --- | --- | --- | | **Financial assets at FVTPL** | | | | | | Foreign currency forward contracts | – | 1.1 | – | 1.1 | | Embedded derivatives | – | 0.1 | – | 0.1 | | Commodity swap contracts | – | 0.6 | 6.0 | 6.6 | | Money market funds | 638.8 | – | – | 638.8 | | **Derivative financial assets used for hedging** | | | | | | Cash flow hedges | | | | | | Foreign currency forward contracts | – | 1.3 | – | 1.3 | | Commodity swap contracts | – | 39.1 | – | 39.1 | | **Assets at FVOCI** | | | | | | Equity securities | 0.7 | – | 2.9 | 3.6 | | **Total financial assets** | **639.5** | **42.2** | **8.9** | **690.6** | | **Financial liabilities at FVTPL** | | | | | | Foreign currency forward contracts | – | (2.6) | – | (2.6) | | Foreign currency futures contracts | – | – | (3.9) | (3.9) | | Commodity swap contracts | – | – | (6.9) | (6.9) | | **Derivative financial liabilities used for hedging** | | | | | | Cash flow hedges | | | | | | Foreign currency forward contracts | – | (0.6) | – | (0.6) | | Commodity swap contracts | – | (0.6) | – | (0.6) | | **Total financial liabilities** | **–** | **(3.8)** | **(10.8)** | **(14.6)** | There were no transfers between Level 1, Level 2 and Level 3 in the year. The following table provides the fair value hierarchy levels into which fair value measurements are categorised for assets and liabilities measured at fair value as at 31 December 2020: | | Level 1 € million | Level 2 € million | Level 3 € million | Total € million | | --- | --- | --- | --- | --- | | **Financial assets at FVTPL** | | | | | | Foreign currency forward contracts | – | 1.3 | – | 1.3 | | Foreign currency futures contracts | – | – | 4.9 | 4.9 | | Embedded derivatives | – | 0.4 | – | 0.4 | | Commodity swap contracts | – | 0.2 | – | 0.2 | | **Derivative financial assets used for hedging** | | | | | | Cash flow hedges | | | | | | Foreign currency forward contracts | – | 1.1 | – | 1.1 | | Commodity swap contracts | – | 8.3 | – | 8.3 | | **Assets at FVOCI** | | | | | | Equity securities | 0.8 | – | 2.8 | 3.6 | | **Total financial assets** | **0.8** | **11.3** | **7.7** | **19.8** | | **Financial liabilities at FVTPL** | | | | | | Foreign currency forward contracts | – | (2.2) | – | (2.2) | | Commodity swap contracts | – | – | (5.8) | (5.8) | | **Derivative financial liabilities used for hedging** | | | | | | Cash flow hedges | | | | | | Foreign currency forward contracts | – | (1.0) | – | (1.0) | | Commodity swap contracts | – | (2.3) | – | (2.3) | | **Total financial liabilities** | **–** | **(5.5)** | **(5.8)** | **(11.3)** | There were no transfers between Level 1 and Level 2 in 2020. During 2020, the Group reclassified foreign currency derivatives relating to the Nigerian Naira from Level 2 to Level 3. This reclassification resulted from the use of a more relevant valuation technique which incorporated greater use of the unobservable inputs and more appropriately approximated their fair values. The fair value of these derivatives as at 31 December 2020 amounted to a financial asset of €4.9 million. 200 COCA-COLA HBC # Notes to the consolidated financial statements*continued* ## 25. Net debt ### Accounting policy Borrowings are initially recognised at the fair value net of transaction costs incurred. After initial recognition, all interest-bearing borrowings are subsequently measured at amortised cost. Amortised cost is calculated using the effective interest rate method whereby any discount, premium or transaction costs associated with a borrowing are amortised to the income statement over the borrowing period. Refer also to Note 16 for accounting policy on leases. Cash and cash equivalents comprise cash balances and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of change in value. Bank overdrafts are classified as short-term borrowings in the balance sheet and for the purpose of the cash flow statement. Time deposits and treasury bills which do not meet the definition of cash and cash equivalents are classified as short-term investments at amortised cost. Money market funds are classified as short-term investments at fair value through profit or loss. Net debt is defined as current borrowings plus non-current borrowings less cash and cash equivalents, and certain other financial assets. Net debt for the year ended 31 December comprised: | | 2021 € million | 2020 € million | | --- | --- | --- | | Current borrowings | 381.7 | 315.2 | | Non-current borrowings | 2,555.7 | 2,610.3 | | Less: Cash and cash equivalents | (782.8) | (1,215.8) | | Financial assets at amortised cost | (196.1) | (92.9) | | Financial assets at fair value through profit or loss | (638.8) | – | | Less: Other financial assets | (834.9) | (92.9) | | **Net debt** | **1,319.7** | **1,616.8** | The financial assets at amortised cost include time deposits amounting to €189.9 million (31 December 2020: €92.9 million) as well as Nigerian treasury bills of €6.2 million (31 December 2020: €nil). The financial assets at fair value through profit and loss in 2021 relate to money market funds. The line item 'Other financial assets' of the consolidated balance sheet includes derivative financial instruments of €39.2 million (31 December 2020: €13.5 million) and related party loans receivable of €4.8 million (31 December 2020: €0.2 million). ### a) Borrowings The Group held the following borrowings as at 31 December: | | 2021 € million | 2020 € million | | --- | --- | --- | | Commercial paper | 235.0 | 200.0 | | Loans payable to related parties (refer to Note 27) | 58.1 | 29.8 | | Other borrowings | 37.7 | 30.6 | | | **330.8** | **260.4** | | Obligations under leases falling due within one year | 50.9 | 54.8 | | **Total borrowings falling due within one year** | **381.7** | **315.2** | | Borrowings falling due within one to two years | | | | Loans payable to related parties (refer to Note 27) | 5.1 | 56.5 | | Borrowings falling due within two to five years | | | | Bonds, bills and unsecured notes | 598.5 | 597.9 | | Borrowings falling due in more than five years | | | | Bonds, bills and unsecured notes | 1,787.2 | 1,785.5 | | Other borrowings | 55.5 | 41.0 | | | **2,446.3** | **2,480.9** | | Obligations under leases falling due in more than one year | 109.4 | 129.4 | | **Total borrowings falling due after one year** | **2,555.7** | **2,610.3** | | **Total borrowings** | **2,937.4** | **2,925.5** | INTEGRATED ANNUAL REPORT 2021 201 Reconciliation of liabilities to cash flows arising from financing activities: | | Borrowings | | Leases | | Derivative assets/ liabilities | | Total € million | | --- | --- | --- | --- | --- | --- | --- | --- | | | Due within one year € million | Due in more than one year € million | Due within one year € million | Due in more than one year € million | € million | € million | | | **Balance at 1 January 2020** | **705.5** | **2,408.2** | **56.3** | **154.7** | **–** | **–** | **3,324.7** | | Cash flows | | | | | | | | | Proceeds from borrowings | 113.8 | 98.0 | – | – | – | – | 211.8 | | Repayments of borrowings | (619.6) | (36.2) | – | – | – | – | (655.8) | | Principal repayments of lease obligations | – | – | (58.7) | – | – | – | (58.7) | | Interest paid | (53.3) | (0.4) | (11.0) | – | – | – | (64.7) | | Proceeds from/(payments for) settlement of derivatives regarding financing activities | – | – | – | – | (1.1) | – | (1.1) | | **Total cash flows** | **(559.1)** | **61.4** | **(69.7)** | **–** | **(1.1)** | **–** | **(568.5)** | | Leases increase | – | – | 5.1 | 48.5 | – | – | 53.6 | | Effect of changes in exchange rates | (3.3) | – | (3.1) | (6.6) | – | – | (13.0) | | Other non-cash movements | 117.3 | 11.3 | 66.2 | (67.2) | 1.1 | – | 128.7 | | **Balance at 31 December 2020** | **260.4** | **2,480.9** | **54.8** | **129.4** | **–** | **–** | **2,925.5** | | Cash flows | | | | | | | | | Proceeds from borrowings | 77.0 | 52.3 | – | – | – | – | 129.3 | | Repayments of borrowings | (102.6) | (31.2) | – | – | – | – | (133.8) | | Principal repayments of lease obligations | – | – | (63.1) | – | – | – | (63.1) | | Interest paid | (36.2) | – | (9.3) | – | – | – | (45.5) | | Proceeds from/(payments for) settlement of derivatives regarding financing activities | – | – | – | – | 4.9 | – | 4.9 | | **Total cash flows** | **(61.8)** | **21.1** | **(72.4)** | **–** | **4.9** | **–** | **(106.2)** | | Leases increase | – | – | 0.8 | 41.2 | – | – | 42.0 | | Effect of changes in exchange rates | 0.2 | 0.2 | 0.4 | 1.0 | – | – | 1.8 | | Other non-cash movements | 132.0 | (55.9) | 67.3 | (62.2) | (2.6) | – | 78.6 | | **Balance at 31 December 2021** | **330.8** | **2,446.3** | **50.9** | **109.4** | **2.3** | **–** | **2,939.7** | The 'Other non-cash movements' primarily include transfers from long-term to short-term liabilities and interest incurred. Also, 'Other non-cash movements' in 2020 are impacted by the change in classification of Multon (refer to Note 15), which resulted in an increase in borrowings for the Group. ### Commercial paper programme In October 2013, the Group established a €1.0 billion Euro commercial paper programme (the 'CP programme') which was updated in September 2014, in May 2017 and in May 2020 to further diversify its short-term funding sources. The Euro-commercial paper notes may be issued either as non-interest-bearing notes sold at a discount or as interest-bearing notes at a fixed or floating rate. All commercial paper issued under the CP programme must be repaid within 7 to 364 days. The CP programme has been granted the Short Term Euro Paper label ('STEP') and the commercial paper is issued through Coca-Cola HBC's fully owned subsidiary Coca-Cola HBC Finance B.V. and is fully, unconditionally and irrevocably guaranteed by Coca-Cola HBC AG. The outstanding amount under the CP programme as at 31 December 2021 was €235.0 million (2020: €200.0 million). ### Committed credit facilities In April 2019, the Group updated its then-existing €500.0 million syndicated revolving credit facility, which was set to expire in June 2021. The updated syndicated revolving credit facility has been increased to €800.0 million and has been extended to April 2024 with the option to be extended for up to two more years until April 2026. In March 2020, the Company exercised its extension option and the facility was extended to April 2025. In April 2021, the Company exercised its second option to further extend the maturity of the syndicated loan facility to April 2026. This facility can be used for general corporate purposes and carries a floating interest rate over EURIBOR. No amounts have been drawn under the syndicated revolving credit facility since inception. The borrower in the syndicated revolving credit facility is Coca-Cola HBC's fully owned subsidiary Coca-Cola HBC Finance B.V. and any amounts drawn under the facility are fully, unconditionally and irrevocably guaranteed by Coca-Cola HBC AG. In December 2019, the Group established a loan facility of US$85.0 million to finance the purchase of production equipment by the Group's subsidiary in Nigeria. The facility has been drawn down by Nigerian Bottling Company (NBC) over the course of 2020 and 2021 and matures in 2027. The obligations under this facility are guaranteed by Coca-Cola HBC AG. As at 31 December 2021, the outstanding liability amounted to €63.2 million (2020: €48.2 million). 202 COCA-COLA HBC # Notes to the consolidated financial statements *continued* ## 25. Net debt *continued* ### Euro medium-term note programme In June 2013, the Group established a new €3.0 billion Euro medium-term note programme (the 'EMTN programme'). The EMTN programme was updated in September 2014, September 2015, April 2019 (when it was increased to €5.0 billion), April 2020 and September 2021. Notes are issued under the EMTN programme through Coca-Cola HBC's 100%-owned subsidiary Coca-Cola HBC Finance B.V. and are fully, unconditionally and irrevocably guaranteed by Coca-Cola HBC AG. In March 2016, Coca-Cola HBC Finance B.V. completed the issue of a €600 million Euro-denominated fixed rate bond maturing in November 2024. The coupon rate of the bond is 1.875% which, including the amortisation of the loss on the forward starting swap contracts over the term of the fixed rate bond, results in an effective interest rate of 2.99%. The net proceeds of the issue were used to partially repay €214.6 million of the 4.25%, €600 million seven-year fixed rate notes due in November 2016. The remaining €385.4 million of these notes was repaid in November 2016 upon maturity. In May 2019, Coca-Cola HBC Finance B.V. completed the issue of a €700 million Euro-denominated fixed rate bond maturing in May 2027 with a coupon rate of 1%, and the issue of a €600 million Euro-denominated fixed rate bond maturing in May 2031 with a coupon rate of 1.625%. The net proceeds of the new issue were used to partially repay €236.6 million of the 2.375%, €800 million seven-year fixed rate bond due in June 2020, while the remaining €563.4 million was repaid in June 2020 upon its maturity. In November 2019, Coca-Cola HBC Finance B.V. completed the issue of a €500 million Euro-denominated fixed rate bond maturing in November 2029 with a coupon rate of 0.625%. As at 31 December 2021, a total of €2.4 billion in notes issued under the EMTN programme were outstanding. ### Summary of notes outstanding as at 31 December | Notes | Start date | Maturity date | Fixed coupon | Book Value | | Fair Value | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | 2021 € million | 2020 € million | 2021 € million | 2020 € million | | €600 million | 10 March 2016 | 11 November 2024 | 1.875% | 598.5 | 597.9 | 631.8 | 648.2 | | €700 million | 14 May 2019 | 14 May 2027 | 1.000% | 696.5 | 695.9 | 717.8 | 741.5 | | €800 million | 14 May 2019 | 14 May 2031 | 1.625% | 596.0 | 595.6 | 640.7 | 678.2 | | €500 million | 21 November 2019 | 21 November 2029 | 0.625% | 494.7 | 494.0 | 496.2 | 518.3 | | **Total** | | | | **2,385.7** | **2,383.4** | **2,486.5** | **2,586.2** | The weighted average effective interest rate of the Euro-denominated fixed rate bonds is 1.69% and the weighted average maturity is 6.3 years. The fair values are within Level 1 of the value hierarchy. None of the Group's debt facilities are subject to any financial covenants that would impact the Group's liquidity or access to capital. Total borrowings at 31 December, were held in the following currencies: | | Current | | Non-current | | | --- | --- | --- | --- | --- | | | 2021 € million | 2020 € million | 2021 € million | 2020 € million | | Euro | 289.5 | 251.8 | 2,438.8 | 2,444.2 | | US Dollar | 13.7 | 13.0 | 73.5 | 59.6 | | Russian Rouble | 57.6 | 24.4 | 5.0 | 61.3 | | Nigerian Naira | 7.5 | 6.3 | 15.5 | 11.5 | | Swiss Franc | 4.6 | 4.4 | 4.4 | 5.8 | | Bulgarian Lev | 2.2 | 5.4 | 5.0 | 8.9 | | Czech Koruna | 1.5 | 3.5 | 5.3 | 7.3 | | UK Sterling | 2.1 | 1.8 | 4.4 | 5.3 | | Polish Zloty | 0.8 | 1.1 | 0.8 | 1.0 | | Romanian Lieu | 0.9 | 1.6 | 0.7 | 1.9 | | Hungarian Forint | 0.6 | 0.5 | 0.4 | 0.5 | | Belarusian Rouble | – | – | 0.8 | 0.7 | | Bosnian Mark | 0.4 | 0.3 | 0.3 | 0.6 | | Croatian Kuna | 0.1 | 0.9 | – | 0.9 | | Other | 0.2 | 0.2 | 0.8 | 0.8 | | **Total borrowings** | **381.7** | **315.2** | **2,555.7** | **2,610.3** | INTEGRATED ANNUAL REPORT 2021 203 The carrying amounts of interest-bearing borrowings held at fixed and floating interest rate as at 31 December 2021, were as follows: | | Fixed Interest rate € million | Floating Interest rate € million | Total € million | | --- | --- | --- | --- | | Euro | 2,693.3 | 35.0 | 2,728.3 | | US Dollar | 83.2 | 4.0 | 87.2 | | Russian Rouble | 8.5 | 54.1 | 62.6 | | Nigerian Naira | 23.0 | – | 23.0 | | Swiss Franc | 9.0 | – | 9.0 | | Bulgarian Lev | 7.2 | – | 7.2 | | Czech Koruna | 6.8 | – | 6.8 | | UK Sterling | 1.1 | 5.4 | 6.5 | | Polish Zloty | 1.6 | – | 1.6 | | Romanian Leu | – | 1.6 | 1.6 | | Hungarian Forint | 1.0 | – | 1.0 | | Belarusian Rouble | 0.8 | – | 0.8 | | Bosnian Mark | 0.7 | – | 0.7 | | Croatian Kuna | 0.1 | – | 0.1 | | Other | 1.0 | – | 1.0 | | **Total interest-bearing borrowings** | **2,837.3** | **100.1** | **2,937.4** | ### b) Cash and cash equivalents Cash and cash equivalents as at 31 December comprise the following: | | 2021 € million | 2020 € million | | --- | --- | --- | | Cash at bank, in transit and in hand | 548.8 | 513.2 | | Short-term deposits | 234.0 | 702.6 | | **Total cash and cash equivalents** | **782.8** | **1,215.8** | Cash and cash equivalents are held in the following currencies: | | 2021 € million | 2020 € million | | --- | --- | --- | | Euro | 518.4 | 1,020.9 | | Nigerian Naira | 161.4 | 102.0 | | Polish Zloty | 28.1 | 7.3 | | Russian Rouble | 9.5 | 8.3 | | US Dollar | 8.4 | 8.2 | | Swiss Franc | 7.3 | 8.2 | | Ukrainian Hryvnia | 7.2 | 15.6 | | Hungarian Forint | 6.5 | 3.6 | | Moldovan Leu | 6.5 | 6.3 | | Romanian Leu | 6.0 | 9.3 | | Belarusian Rouble | 5.8 | 2.7 | | Serbian Dinar | 5.8 | 9.9 | | Bosnian Mark | 3.3 | 4.8 | | UK Sterling | 2.2 | 2.0 | | Czech Koruna | 0.8 | 0.4 | | Croatian Kuna | 0.7 | 2.5 | | Other | 4.9 | 3.8 | | **Total cash and cash equivalents** | **782.8** | **1,215.8** | As at 31 December 2021, time deposits of €189.9 million (2020: €92.9 million), which do not meet the definition of cash and cash equivalents, and investment in Nigerian treasury bills of €6.2 million (2020: €nil), which relate to the outstanding balance held for the repayment of Nigerian Bottling Company former minority shareholders following the 2011 acquisition of non-controlling interests, are recorded as other financial assets. Cash and cash equivalents of €161.4 million (2020: €102.0 million) equivalent in Nigerian Naira include an amount of €8.9 million (2020: €11.0 million) which relates to the outstanding balance held for the repayment of Nigerian Bottling Company former minority shareholders, following the 2011 acquisition of non-controlling interests. The amount of dividends payable to the Company by its operating subsidiaries is subject to, among other restrictions, general limitations imposed by the corporate laws and exchange control restrictions of the jurisdictions where those subsidiaries are organised and operate. Also, there are fund transfer restrictions in certain countries in which we operate, in particular Belarus, Nigeria, Serbia and Ukraine, but these restrictions do not have a material impact on the Group's liquidity, as the amounts of cash and cash equivalents held in such countries are generally retained for capital expenditure, working capital and dividend distribution purposes. Intra-group dividends paid by certain of our subsidiaries are also subject to withholding taxes. 204 COCA-COLA HBC # Notes to the consolidated financial statements *continued* ## 26. Equity ### Accounting policies #### Share capital Coca-Cola HBC has only one class of shares, ordinary shares. When new shares are issued, they are recorded in share capital at their par value. The excess of the issue price over the par value is recorded in the share premium reserve. Incremental external costs directly attributable to the issue of new shares or to the process of returning capital to shareholders are recorded in equity as a deduction, net of tax, in the share premium reserve. #### Dividends Dividends are recorded in the Group's consolidated financial statements, against the relevant equity component, in the period in which they are approved by the Group's shareholders. ### a) Share capital, share premium and Group reorganisation reserve | | Number of shares (authorised and issued) | Share capital € million | Share premium € million | Group reorganisation reserve € million | | --- | --- | --- | --- | --- | | Balance as at 1 January 2020 | 369,930,157 | 2,010.8 | 3,545.3 | (6,472.1) | | Shares issued to employees exercising stock options (refer to Note 28) | 582,440 | 3.6 | 4.0 | – | | Dividends | – | – | (227.9) | – | | **Balance as at 31 December 2020** | **370,512,597** | **2,014.4** | **3,321.4** | **(6,472.1)** | | Shares issued to employees exercising stock options (refer to Note 28) | 1,282,821 | 7.9 | 11.7 | – | | Dividends | – | – | (235.8) | – | | **Balance as at 31 December 2021** | **371,795,418** | **2,022.3** | **3,097.3** | **(6,472.1)** | The Group reorganisation reserve relates to the impact from adjusting share capital, share premium and treasury shares to reflect the respective statutory amounts of Coca-Cola HBC on 25 April 2013, together with the transaction costs incurred by the latter, relating primarily to the re-domiciliation of the Group and its admission to listing in the premium segment of the London Stock Exchange, following successful completion of the voluntary share exchange offer (refer also to Note 1). These transactions were treated as a reorganisation of an existing entity that has not changed the substance of the reporting entity. In 2021, the share capital of Coca-Cola HBC increased by the issue of 1,282,821 (2020: 582,440) new ordinary shares following the exercise of stock options pursuant to the Coca-Cola HBC AG's employees' stock option plan. Total proceeds from the issuance of the shares under the stock option plan amounted to €19.6 million (2020: €7.6 million). Following the above changes, on 31 December 2021 the share capital of the Group amounted to €2,022.3 million and comprised 371,795,418 shares with a nominal value of CHF 6.70 each. ### b) Dividends On 16 June 2020, the shareholders of Coca-Cola HBC AG at the Annual General Meeting approved a dividend distribution of €0.62 per share. The total dividend amounted to €227.9 million and was paid on 28 July 2020. Of this, an amount of €2.2 million related to shares held by the Group. The shareholders of Coca-Cola HBC AG approved a dividend distribution of €0.64 per share at the Annual General Meeting held on 22 June 2021. The total dividend amounted to €235.8 million and was paid on 3 August 2021. Of this, an amount of €2.2 million related to shares held by the Group. The Board of Directors of Coca-Cola HBC AG has proposed a €0.71 dividend per share in respect of 2021. If approved by the shareholders of Coca-Cola HBC AG, this dividend will be paid in 2022. ### c) Treasury shares and reserves The reserves of the Group as at 31 December were as follows: | | 2021 € million | 2020 € million | | --- | --- | --- | | **Treasury shares** | **(146.6)** | **(155.5)** | | **Exchange equalisation reserve** | **(1,154.0)** | **(1,242.1)** | | **Other reserves** | | | | Hedging reserve, net | 9.9 | (27.5) | | Tax-free reserve | 163.8 | 163.8 | | Statutory reserves | 28.3 | 28.4 | | Stock option and performance share reserve | 86.3 | 80.1 | | Financial assets at fair value through other comprehensive income reserve, net | 0.6 | 0.6 | | Other | 21.3 | 21.3 | | **Total other reserves** | **310.2** | **266.7** | | **Total reserves** | **(990.4)** | **(1,130.9)** | 205INTEGRATED ANNUAL REPORT 2021 Treasury shares Treasury shares held by the Group represent shares acquired following approval of share buy-back programmes, forfeited shares under the equity compensation plan operated by the Group, as well as shares representing the initial ordinary shares of Coca‑Cola HBC acquired from Kar‑Tess Holding. An amount of €8.9 million in 2021 (2020: €14.3 million) relates to treasury shares provided to employees in connection with vested performance share awards under the Group’s employee incentive scheme, which was reflected as an appropriation of reserves between ‘Treasury shares’ and ‘Other reserves’, more specifically the ‘Stock option and performance share reserve’ in the consolidated statement ofchanges in equity. As at 31 December 2021, 5,894,583 (2020: 6,189,415) treasury shares were held by the Group. Exchange equalisation reserve The exchange equalisation reserve comprises all foreign exchange differences arising from the translation of the financial statements ofGroup entities with functional currencies other than the Euro. Other reserves Hedging reserve The hedging reserve reflects changes in the fair values of derivatives accounted for as cash flow hedges, net of the deferred tax related tosuch balances. Tax‑free and statutory reserves The tax-free reserve includes investment amounts exempt from tax according to incentive legislation, other tax-free income or income taxed at source. Statutory reserves are particular to the various countries in which the Group operates. The amount of statutory reserves ofthe parent entity, Coca‑Cola HBC AG, is €nil. Stock option and performance share reserve The stock option and performance share reserve represents the cumulative charge to the income statement for employee stock option andperformance share awards less the vested performance share awards. Other Other reserves are particular to the various countries in which the Group operates and include shares held for the Group’s employee share purchase plan, which is an equity compensation plan in which eligible employees may participate, as well as the Group’s share of changes inother reserves of equity method investments. ### 27. Related party transactions a) The Coca-Cola Company As at 31 December 2021, The Coca‑Cola Company indirectly owned 21.0% (2020:23.0%) of the issued share capital of Coca‑Cola HBC. TheCoca‑Cola Company considers Coca‑Cola HBC to be a ‘key bottler’ and has entered into bottlers’ agreements with Coca‑Cola HBC inrespect of each of the Group’s territories. All the bottlers’ agreements entered into by The Coca‑Cola Company and Coca‑Cola HBC are Standard International Bottlers’ (‘SIB’) agreements. The terms of the bottlers’ agreements grant Coca‑Cola HBC the right to produce and theexclusive right to sell and distribute the beverages of The Coca‑Cola Company in each of the countries in which the Group operates. Consequently, Coca‑Cola HBC is obliged to purchase all concentrate for The Coca‑Cola Company’s beverages from The Coca‑Cola Company, or its designee, in the ordinary course of business. On 10 October 2012, The Coca-Cola Company agreed to extend the term ofthe bottlers’ agreements for a further 10 years until 2023. The Coca-Cola Company owns or has applied for the trademarks that identify its beverages in each of the countries in which the Group operates. The Coca‑Cola Company has authorised Coca‑Cola HBC and certain of its subsidiaries to use the trademark ‘Coca‑Cola’ in their corporate names. 206 COCA-COLA HBC # Notes to the consolidated financial statements *continued* ## 27. Related party transactions *continued* The below table summarises transactions with The Coca-Cola Company and its subsidiaries: | | 2021 € million | 2020 € million | | --- | --- | --- | | Purchases of concentrate, finished products and other items | **1,598.8** | 1,374.6 | | Net contributions received for marketing and promotional incentives | **83.1** | 90.7 | | Sales of finished goods and raw materials | **4.5** | 3.5 | | Other income | **2.8** | 6.3 | | Other expenses | **4.2** | **5.6** | The Coca-Cola Company makes discretionary marketing contributions to Coca-Cola HBC's operating subsidiaries. The participation in shared marketing agreements is at The Coca-Cola Company's discretion and, where co-operative arrangements are entered into, marketing expenses are shared. Such arrangements include the development of marketing programmes to promote The Coca-Cola Company's beverages. Contributions received from The Coca-Cola Company for marketing and promotional incentives during the year amounted to €83.1 million (2020: €90.7 million); contributions made by The Coca-Cola Company to Coca-Cola HBC for price support and marketing and promotional campaigns in respect of specific customers in 2021 totalled €52.6 million (2020: €63.9 million), while contributions made by The Coca-Cola Company to Coca-Cola HBC for general marketing programmes in 2021 totalled €30.5 million (2020: €26.8 million). The Coca-Cola Company has also customarily made additional payments for marketing and advertising directly to suppliers as part of the shared marketing arrangements. The proportion of direct and indirect payments, made at The Coca-Cola Company's discretion, will not necessarily be the same from year to year. As at 31 December 2021, the Group had a total amount due from The Coca-Cola Company of €52.8 million (2020: €40.9 million), and a total amount due to The Coca-Cola Company of €223.1 million (2020: €196.4 million). The Group paid a total consideration of €5.6 million for the acquisition of the Costa Express Business (refer to Note 23). ### b) Frigoglass S.A. ('Frigoglass'), Kar-Tess Holding and AG Leventis (Nigeria) Plc Truad Verwaltungs AG currently indirectly owns 48.6% of Frigoglass and 99.3% of AG Leventis (Nigeria) Plc and also indirectly controls Kar-Tess Holding, which holds approximately 23.0% (2020: 23.0%) of Coca-Cola HBC's total issued share capital. The below table summarises transactions with the above entities: | Frigoglass & subsidiaries | 2021 € million | 2020 € million | | --- | --- | --- | | Purchases of coolers, cooler parts, glass bottles, crowns and raw and other materials | **117.6** | 92.7 | | Maintenance and other expenses | **28.6** | 21.1 | | **AG Leventis (Nigeria) Plc** | | | | Purchases of finished goods and other items | **9.3** | 5.1 | | Other expenses | **0.1** | 0.7 | Frigoglass, a company listed on the Athens Exchange, is a manufacturer of coolers, cooler parts, glass bottles, crowns and plastics. Frigoglass has a controlling interest in Frigoglass Industries (Nigeria) Limited, a company in which the Group has a 23.9% effective interest, through its investment in Nigerian Bottling Company Ltd. The Group entered into a supply agreement with Frigoglass for the purchase of cooling equipment in 1999. The supply agreement was extended in 2004, 2008, 2013, 2018 and, most recently, in 2021, on substantially similar terms. The current agreement expires on 31 December 2025. As at 31 December 2021, Coca-Cola HBC owed €14.9 million (2020: €11.8 million) to and was owed €0.8 million (2020: €0.8 million) by Frigoglass and its subsidiaries. During 2021, the Group received dividends of €1.4 million (2020: €nil) from Frigoglass Industries (Nigeria) Limited, which are included in the line 'Net receipts from non-integral equity method investments' in the consolidated cash flow statement. As at 31 December 2021, the Group owed €0.9 million (2020: €1.8 million) and had a lease liability of €6.0 million (2020: €nil) to AG Leventis (Nigeria) Plc. Capital commitments to Frigoglass and its subsidiaries as at 31 December 2021 amounted to €33.5 million (€14.1 million as at 31 December 2020) including the Group's share of its joint ventures' capital commitments to Frigoglass. ### c) Other related parties The below table summarises transactions with other related parties: | | 2021 € million | 2020 € million | | --- | --- | --- | | Purchases | **1.5** | 1.8 | | Other expenses | **15.1** | 16.4 | During 2021, the Group incurred subsequent expenditure for fixed assets of €1.5 million (2020: €1.8 million) from other related parties. Furthermore, during 2021, the Group incurred expenses of €15.1 million (2020: €16.4 million) mainly related to maintenance services for cold drink equipment and installations of coolers, fountains, vending and merchandising equipment from other related parties. As at 31 December 2021, the Group had a total amount due to other related parties of €0.6 million (2020: €1.9 million) and a total amount of loans receivable from other related parties of €0.9 million (2020: €nil). During 2021, the Group received dividends of €0.5 million from BevService S.r.l. (2020: €1.3 million), which are included in the line 'Net receipts from non-integral equity method investments' in the consolidated cash flow statement. INTEGRATED ANNUAL REPORT 2021 207 # **d) Joint ventures** During 2021, the Group purchased €5.2 million of finished goods (2020: €10.9 million) from joint ventures. In addition, during 2021 the Group recorded sales of finished goods and raw materials of €4.8 million (2020: €2.8 million) to joint ventures. Furthermore, the Group recorded other income of €16.2 million (2020: €10.2 million) from joint ventures and other expenses of €13.4 million (2020: €11.5 million) including €7.3 million (2020: €5.6 million) of interest charges from loans with joint ventures. As at 31 December 2021, the Group owed €149.8 million including loans payable of €63.2 million (2020: €159.6 million including loans payable of €86.3 million) to and was owed €13.9 million including loans receivable of €7.1 million (2020: €13.1 million including loans receivable of €7.0 million) by joint ventures. During the full year ended 31 December 2021, the Group received dividends and capital returns of €47.8 million from integral joint ventures (2020: dividends of €27.1 million), which are included in the line 'Net receipts from integral equity method investments' in the consolidated cash flow statement. # **e) Directors and senior management** Bruno Pietracci and Henrique Braun have been elected to the Board of Coca-Cola HBC following a proposal made by The Coca-Cola Company. There have been no transactions between Coca-Cola HBC and the Directors and senior management except for remuneration (refer to Note 8). # **28. Share-based payments** # **Accounting policies** # **Stock option and performance share award plan** Coca-Cola HBC provides equity-settled share-based payments to its senior managers in the form of an employee stock option and performance share award plan (the 'Plan'). Stock options under the Plan are measured at fair value at the date of grant. Fair value reflects the parameters of the compensation plan, the risk-free interest rate, the expected volatility, the dividend yield and the early exercise experience under the Plan. Expected volatility is determined by calculating the historical volatility of Coca-Cola HBC's share price over previous years. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period. The Plan offers a specified number of performance share awards that vest three years after grant. The fair value is determined at the grant date and reflects the parameters of the compensation plan, the dividend yield and the closing share price on the date of grant. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period. At the end of each reporting period the Group revises its estimates of the number of shares that are expected to vest based on non-market conditions, and recognises the impact of the revision to original estimates, if any, in the income statement with a corresponding adjustment to equity. When the terms of an equity-settled award are modified, the minimum expense recognised is the grant date fair value of the unmodified award, provided the original vesting terms of the award are met. An additional expense, measured as at the date of modification, is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee. # **Employee Share Purchase Plan** The Group operates an employee share purchase plan ('ESPP'), an equity compensation plan in which eligible employees can participate. The Group makes contributions to the plan for participating employees and recognises expenses over the vesting period of the contributions. The change included in employee costs regarding share-based payments for the years ended 31 December is analysed as follows: | | 2021 € million | 2020 € million | | --- | --- | --- | | Performance share awards | 14.6 | 10.0 | | Employee Share Purchase Plan | 5.5 | 5.5 | | **Total share-based payments charge** | **20.1** | **15.5** | # **Terms and conditions** # **Stock option and performance share award plan** Based on Plan rules, senior managers are granted awards of stock options based on performance, potentiality and level of responsibility. Options are granted at an exercise price equal to the closing price of the Company's shares trading on the London Stock Exchange on the day of the grant. Options vest in one-third increments each year for three years and can be exercised for up to 10 years from the date of award. When the options are exercised, the proceeds received by the Group, net of any transaction costs, are credited to share capital (at the nominal value) and share premium. The Group has not issued any new stock options since 2014. Since 2015, performance shares are the primary long-term award. Senior managers are granted performance share awards, which have a three-year vesting period and are linked to Group-specific key performance indicators. The closing price of the Company's shares trading on the London Stock Exchange on the day of the grant is used to determine the number of performance share awards granted. In 2018, the Group modified the performance share plan, in order for eligible employees to receive upon vesting, additional to the specific number of shares, the value of dividends corresponding to the years from grant till vest date, subject to the approval of the Remuneration Committee. 208 COCA-COLA HBC ### Notes to the consolidated financial statements continued ### 28. Share‑based payments continued Employee Share Purchase Plan The Employee Share Purchase Plan is administered by a Plan Administrator. Under the terms of this plan, employees have the opportunity toinvest 1% to 15% of their salary in ordinary Coca‑Cola HBC shares by contributing to the plan through a payroll deduction. Employee deductions are used monthly to purchase ordinary Coca‑Cola HBC shares in the open market (London Stock Exchange). Coca‑Cola HBC will match employee contributions up to a maximum of 3% of the employee’s salary. Employer matching cash contributions vest one year after the grant, at which time they are used to purchase matching shares on the open market that are immediately vested. Dividends received in respect of shares held under this plan are used to purchase additional shares at the time of dividend distribution. Shares are held under the Plan Administrator. For employees resident in Greece, Coca‑Cola HBC matches the employees’ contribution with an annual employer contribution of up to 5% of the employees’ salary that vests annually in December of each year. Stock option activity The outstanding stock options are fully vested and are exercisable until 2026. A summary of stock option activity in 2021 under all grants is as follows: | Number | | | | 1 | | | | --- | --- | --- | --- | --- | --- | --- | | | | | Weighted | | | Weighted | | of stock | | | average | | | average | | options | | exercise price | | | exercise price | | | | 2021 | | 2021 (EUR) | | | 2021 (GBP) | Outstanding at 1 January 3,621,676 15.97 14.49 Exercised (1,282,821) 15.66 13.17 Outstanding at 31 December 2,338,855 18.08 15.21 Exercisable at 31 December 2,338,855 18.08 15.21 A summary of stock option activity in 2020 under all grants is as follows: | Number | | 1 | | | | --- | --- | --- | --- | --- | | | Weighted | | | Weighted | | of stock | average | | | average | | options | exercise price | | exercise price | | | 2020 | 2020 (EUR) | | 2020 (GBP) | | Outstanding at 1 January 4,204,144 16.45 14.05 Exercised (582,440) 12.53 11.37 Expired (28) 17.09 15.50 Outstanding at 31 December 3,621,676 15.97 14.49 Exercisable at 31 December 3,621,676 15.97 14.49 1. For convenience purposes, the prices are translated at the closing exchange rate. Total proceeds from the issuance of the shares under the stock option plan in 2021 amounted to €19.6 million (2020: €7.6 million). The weighted average remaining contractual life of stock options outstanding at 31 December 2021 was 2.5 years (2020: 3.2 years). Performance shares activity A summary of performance shares activity is as follows: | Number of | | Number of | | | --- | --- | --- | --- | | performance | | performance | | | | shares | | shares | | | 2021 | | 2020 | Outstanding at 1 January 2,294,478 1,894,023 2 Granted 835,477 1,138,829 Vested (294,832) (468,818) Forfeited/Cancelled (359,756) (269,556) Outstanding at 31 December 2,475,367 2,294,478 2. Includes dividend equivalent shares. The weighted average remaining contractual life of performance shares outstanding at 31 December 2021 was 1.3 years (2020: 1.5 years). The fair value for the 2021 performance share plan is £23.80 per share (2020: £14.94). Relevant inputs into the valuation are as follows: 2021 2020 Weighted average share price £23.80 £14.94 Dividend yield nil nil Weighted average exercise period 3.0 years 3.0 years ### 29. Contingencies In relation to the Greek Competition Authority’s decision of 25 January 2002, one of Coca‑Cola Hellenic Bottling Company S.A.’s competitors had filed a lawsuit against Coca‑Cola Hellenic Bottling Company S.A. claiming damages in an amount of €7.7 million. The court offirst instance heard the case on 21 January 2009 and subsequently rejected the lawsuit. The plaintiff appealed the judgement and on 9December 2013 the Athens Court of Appeals rejected the plaintiff’s appeal. On 19 April 2014, the same plaintiff filed a new lawsuit against Coca-Cola Hellenic Bottling Company S.A. (following the spin‑off, Coca‑Cola HBC Greece S.A.I.C.) claiming payment of €7.5 million as compensation forlosses and moral damages for alleged anti‑competitive commercial practices of Coca‑Cola Hellenic Bottling Company S.A. between 1994 and 2013. On 21 December 2018, the plaintiff served their withdrawal from the lawsuit. INTEGRATED ANNUAL REPORT 2021 209 However, on 20 June 2019 the same plaintiff filed a new lawsuit against Coca-Cola HBC Greece S.A.I.C. claiming payment of €10.1 million as compensation for losses and moral damages again for alleged anti-competitive commercial practices of Coca-Cola Hellenic Bottling Company S.A. for the same period between 1994 and 2013. On 16 July 2021, the Athens Multimember Court of First Instance issued its judgment number 1929/2021 (hereinafter the 'Judgment'), which adjudicates that Coca-Cola HBC Greece S.A.I.C. is obliged to pay to the plaintiff an amount of circa €0.9 million plus interest as of 31 December 2003. Both Coca-Cola HBC Greece S.A.I.C. and the plaintiff have appealed against this decision to the court of appeals. Both appeals have been scheduled to be heard on 19 January 2023. Management believes that any liability to the Group that may arise as a result of these pending legal proceedings will not have a material adverse effect on the results of operations, cash flows, or the financial position of the Group taken as a whole. With respect to the ongoing investigation of the Greek Competition Commission initiated on 6 September 2016, regarding Coca-Cola HBC Greece S.A.I.C.'s operations in certain commercial practices in the non-alcoholic beverages market, the Rapporteur of the Greek Competition Commission appointed for this case issued her Statement of Objections on 5 July 2021. According to this Statement of Objections, Coca-Cola HBC Greece S.A.I.C. has allegedly breached Article 2 of Law 3959/2011 and Article 102 of 'Treaty on the Functioning of the European Union' ('TFEU') in the Greek on-premise market for the sale of cola and non-cola beverages. In particular, according to this Statement of Objections, during the period 2015-2020, Coca-Cola HBC Greece S.A.I.C. allegedly undertook a series of anti-competitive practices in the relevant market, thereby excluding competitors and limiting their growth possibilities. The Statement of Objections recommends that the Greek Competition Commission should impose a fine upon Coca-Cola HBC Greece S.A.I.C., and that the latter is required to omit the allegedly anti-competitive practices in the future. The Statement of Objections is not binding on the Greek Competition Commission, which will decide on the case after it has taken into consideration all evidence, as well as the arguments put forward by all the parties involved. Coca-Cola HBC Greece S.A.I.C. has vigorously defended its commercial practices, in rebuttal of the allegations set out in the Statement of Objections. The hearing of the case, before the plenary session of the Greek Competition Commission, was concluded on 29 November 2021 and the supplementary briefs of the parties were submitted on 16 December 2021. At this stage, it is difficult to predict with certainty the outcome of the hearing and the timing of the decision by the Greek Competition Commission. In 1992, our subsidiary Nigerian Bottling Company ('NBC') acquired a manufacturing facility in Nigeria from Vacunak, a Nigerian company. In 1994, Vacunak filed a lawsuit against NBC, alleging that a representative of NBC had orally agreed to rescind the sale agreement and instead enter into a lease agreement with Vacunak. As part of its lawsuit, Vacunak sought compensation for rent and loss of business opportunities. NBC discontinued all use of the facility in 1995. On 19 August 2013, NBC received the written judgment of the Nigerian court of first instance issued on 28 June 2012 providing for damages of approximately €17.2 million. NBC has filed an appeal against the judgment. Based on advice from NBC's outside legal counsel, we believe that it is unlikely that NBC will suffer material financial losses from this case. We have consequently not provided for any losses in relation to this case. In May 2021, the European Commission sent CCH a questionnaire as part of a preliminary investigation into a possible infringement by a CCH subsidiary, Coca-Cola European Partners, and The Coca-Cola Company of EU competition rules through the granting of conditional rebates to 'off-trade' customers capable of foreclosing competition from other suppliers. CCH's subsidiary will vigorously defend its commercial practices and is actively co-operating with the European Commission. The fact that the European Commission is carrying out a preliminary investigation does not mean that it will open formal proceedings. It is not possible to predict how long the investigation will take and its ultimate outcome. The tax filings of the Group and its subsidiaries are routinely subjected to audit by tax authorities in most of the jurisdictions in which the Group conducts business. These audits may result in assessments of additional taxes. The Group provides for additional tax in relation to the outcome of such tax assessments, to the extent that a liability is probable and estimable. The Group is also involved in various other legal proceedings. Management believes that any liability to the Group that may arise as a result of these pending legal proceedings will not have a material adverse effect on the results of operations, cash flows, or the financial position of the Group taken as a whole. ## 30. Commitments ### Capital commitments As at 31 December 2021, the Group had capital commitments for property, plant and equipment amounting to €166.1 million (2020: €115.4 million). Of this, €9.0 million are related to the Group's share of the commitments arising from joint ventures (2020: €3.0 million). Capital commitments for 2021 include total future minimum lease payments under leases not yet commenced to which the Group was committed at 31 December 2021 of €18.1 million (2020: €11.9 million). ## 31. Post balance sheet events ### a) Acquisition of Coca-Cola Bottling Company of Egypt S.A.E. On 12 August 2021, the Group entered into a sale and purchase agreement to acquire approximately 52.7% of Coca-Cola Bottling Company of Egypt S.A.E. ('CCBCE'), the bottling partner of The Coca-Cola Company ('TCCC') in Egypt, from MAC Beverages Limited and certain of its affiliated entities ('MBL acquisition'). The MBL acquisition was completed on 13 January 2022 and resulted in the Group obtaining control over CCBCE. The acquisition of CCBCE expands the Group's existing footprint on the African continent and further increases its exposure to high-growth markets, as it provides access to one of the largest non-alcoholic ready-to-drink markets by volume in Africa. In addition, sharing of the Group's proven capabilities, experience and best practices with CCBCE is expected to unlock growth opportunities, creating value for all stakeholders. 210 COCA-COLA HBC ## Notes to the consolidated financial statements *continued* ### 31. Post balance sheet events *continued* The operating results and assets and liabilities of CCBCE will be consolidated from 14 January 2022. The fair value of the consideration for the MBL acquisition consists of €264.9 million, which has already been transferred, and an additional payment that is to be determined, following discussions and conditions agreed between the Group and MBL, based on CCBCE's past performance, net financial position and working capital movement. As part of the MBL acquisition completion, a convertible loan which had been granted to CCBCE from a wholly-owned affiliate of TCCC, one of its major shareholders, was also transferred to the Group for a consideration of €19.1 million. The consideration was equal to the outstanding principal amount of the convertible loan and any unpaid interest at the time of its transfer. The loan is convertible at its maturity in March 2022 into new CCBCE shares at fair market value and was eliminated upon consolidation of CCBCE. Details of the MBL acquisition with regard to provisionally determined fair values of the net assets acquired, non-controlling interests and goodwill are as follows: | | Fair Value € million | | --- | --- | | Franchise agreements | 367.7 | | Property, plant and equipment | 315.3 | | Inventories | 59.2 | | Trade, other receivables and assets | 65.2 | | Cash and cash equivalents | 15.9 | | Borrowings | (217.0) | | Trade and other payables | (127.4) | | Net deferred tax liabilities | (121.9) | | **Net identifiable assets acquired** | **357.0** | | Less: Non-controlling interests | (169.0) | | Add: Goodwill arising on acquisitions | 76.9 | | **Net assets acquired** | **264.9** | The table above excludes the additional payment that may adjust the provisionally determined fair values of the net assets acquired, non-controlling interests and goodwill. Fair values on acquisition are provisional due to the timing of the transaction and will be finalised within 12 months of the acquisition date. The goodwill is attributable to CCBCE's strong market position and growth potential. The line 'Borrowings' in the above table includes the convertible loan as well as third-party loans of €122.7 million, which have been repaid and replaced with intra-group borrowings. The Group has chosen to recognise the non-controlling interests at their proportionate share of the fair value of CCBCE's net identifiable assets acquired. On 12 August 2021, the Group entered into an additional sale and purchase agreement to acquire approximately 42% of Coca-Cola Bottling Company of Egypt S.A.E. (CCBCE) from a wholly-owned affiliate of TCCC ('TCCC acquisition'). The TCCC acquisition was completed on 25 January 2022. The fair value of the consideration paid for the TCCC acquisition amounted to €108.9 million. The transaction was treated as separate to the MBL acquisition, considering that whilst the transactions above were entered into at the same time and in contemplation of each other, they are separate from a commercial and contractual perspective and, as such, they are treated as two separate transactions. The TCCC acquisition was accordingly accounted for as an equity transaction. Following the completion of both the transactions, the Group holds a 94.7% interest in CCBCE. #### b) Other subsequent events The events involving Ukraine and Russia during the first quarter of 2022 have, among other things, resulted in increased volatility in currency markets causing the Russian Rouble and the Ukrainian Hryvnia to depreciate significantly against some major currencies. As of 11 March 2022, the Russian Rouble and the Ukrainian Hryvnia had depreciated by approximately 72% and 8% respectively against the Euro, compared to the 31 December 2021 exchange rates. On 8 March 2022, The Coca-Cola Company ('TCCC') announced that it is suspending its business in Russia. At the time of publication, the Group is working closely with TCCC to implement this decision. The Group is currently assessing the financial effect of the above on its Russia and Ukraine operations. No impact to the Group's ability to continue as a going concern has been identified because of this event. The 2021 operating profit from Ukraine and Russia (including share of results of Multon joint venture, our Russian juice business) represented approximately 2% and 18% respectively of the Group's consolidated operating profit, while non-current assets represented approximately 1% and 9% respectively of the Group's total non-current assets as at 31 December 2021. Management is continuously monitoring developments in the area to ensure timely actions and initiatives are undertaken to minimise any adverse impact to the Group. On 15 March 2022, the Remuneration Committee granted 1,220,231 performance share awards under the performance share plan, which have a three-year vesting period. 211INTEGRATED ANNUAL REPORT 2021 ## Swiss ## Statutory ## Reporting ### Contents Swiss Statutory Reporting 212 Report of the statutory auditor on Coca-Cola HBC AG’s consolidated financial statements 216 Report of the statutory auditor on Coca-Cola HBC AG’s financial statements 219 Coca-Cola HBC AG’s financial statements 232 Report of the statutory auditor on the Statutory Remuneration Report 233 Statutory Remuneration Report 212 COCA-COLA HBC ### Swiss statutory reporting Report of the statutory auditor to the General Meeting of Coca‑Cola HBC AG Steinhausen (Zug) ## Report on the audit of the consolidated financial statements ### Opinion We have audited the consolidated financial statements of Coca‑Cola HBC AG and its subsidiaries (the Group), which comprise the consolidated income statement and consolidated statement of comprehensive income for the year ended 31 December 2021, the consolidated balance sheet as at 31 December 2021 and the consolidated statement of changes in equity and consolidated cash flowstatement for the year then ended, including the notes to the consolidated financial statements and a summary of significant accountingpolicies. In our opinion, the accompanying consolidated financial statements (pages 154 to 210) give a true and fair view of the consolidated financialposition of the Group as at 31 December 2021 and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and comply with Swiss law. ### Basis for opinion We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss Auditing Standards. Ourresponsibilities under those provisions and standards are further described in the “Auditor’s responsibilities for the audit of the consolidated financial statements” section of our report. We are independent of the Group in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, as well as the International Code of Ethics for Professional Accountants (including International Independence Standards) of the International Ethics Standards Board for Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. ### Our audit approach Overview Overall Group materiality: € 36.7 million Audit scope We conducted full scope audit procedures on the financial information of 15 subsidiaries and one joint venture in 14 countries spread across all of the Group’s reportable segments. We also conducted procedures around specific account balances and transactions and analytical review procedures for other subsidiaries and Group functions. Our audit scope addressed 85% of consolidated net sales revenue, 84% ofconsolidated profit before tax and 87% of consolidated total assets of the Group. Key audit matters As key audit matters the following areas of focus have been identified: • Goodwill and indefinite-lived intangible assets impairment assessment • Uncertain tax positions ### Materiality The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide reasonable assurance that the consolidated financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis ofthe consolidated financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the consolidated financial statements as a whole. Overall Group materiality € 36’700’000 Benchmark applied Profit before tax Rationale for the materiality We chose profit before tax as the benchmark because, in our view, it is the benchmark against which benchmark applied theperformance of the Group is most commonly measured, and it is a generally accepted benchmark. We agreed with the Audit and Risk Committee that we would report to them misstatements above € 1.5 million identified during our audit aswell as any misstatements below that amount which, in our view, warranted reporting for qualitative reasons. 213INTEGRATED ANNUAL REPORT 2021 ### Audit scope We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates. The Group operates through its trading subsidiaries in 27 European countries and in Nigeria, as set out in Notes 1 and 6 to the consolidated financial statements. The processing of the accounting records for these subsidiaries is largely centralised in a shared services centre in Bulgaria, except for the subsidiaries in Russia, Ukraine, Belarus, Armenia and North Macedonia, which process their accounting records locally. The Group also operates centralised treasury functions in the Netherlands and in Greece and a centralised sourcing function in the Netherlands for the procurement of key raw materials. Based on the significance to the consolidated financial statements and in light of the key audit matters as noted below, we identified 15subsidiaries and one joint venture in 14 countries spread across all of the Group’s reportable segments (including the trading subsidiaries in Russia, Italy, Nigeria, Poland, Romania, and Switzerland) which, based on our scoping analysis, required a full scope audit of their financial information. In addition, audit procedures were performed with respect to the centralised treasury functions by the group engagement team in Greece and with respect to the centralised procurement function by the component audit team in the Netherlands. The group engagement team also performed analytical review and other procedures on balances and transactions of subsidiaries not covered by the procedures described above. As the Swiss statutory auditor, we issued group audit instructions to PwC Greece, who has the responsibility as the group audit engagement team for the Company’s reporting requirements for the London Stock Exchange. These instructions covered the scope of our group audit toenable us to fulfil our responsibilities under Swiss law. As the ultimate group engagement team, we had ongoing interactions with the group engagement team in Greece to be continuously updated and to monitor their progress and results of their procedures. We reviewed the instructions which PwC Greece issued to component audit teams regarding centralised audit procedures performed at the shared services centres in Bulgaria and Greece and shared audit comfort with component teams as it relates to IT general controls, cybersecurity risks and the upgrade of the Group’s ERP system. We reviewed working papers and undertook additional interactions as considered necessary depending on the significance of the component, accounting and audit matters. The Group consolidation, financial statement disclosures and a number ofareas of significant judgement and estimates, including goodwill and intangible assets and the Group’s overall going concern assessment, were audited by the group engagement team together with PwC Greece. Due to the travel and other restrictions put in place in response to the COVID-19 pandemic, the group engagement team held frequent virtual meetings to oversee the work performed by the group and component audit teams. As the ultimate group engagement team, we held remote meetings and discussions with the management of the trading subsidiaries in Russia, Italy, Poland, Romania, Switzerland and the management of the joint venture in Russia to discuss business performance and outlook, matters relating to the ongoing COVID-19 pandemic, regulation and taxation, and any specific accounting and auditing matters identified, including fraud and internal controls. Based on the above, the subsidiaries and joint venture which were in the scope for the purposes of the group audit accounted for 85% ofconsolidated net sales revenue, 84% of consolidated profit before tax and 87% of consolidated total assets of the Group. This, together with the additional procedures performed by us as group engagement team, provided us with sufficient appropriate evidence for our audit opinion on the consolidated financial statements. ### Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements asawhole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 214 COCA-COLA HBC ### Swiss statutory reporting continued ### Goodwill and indefinite‑lived intangible assets impairment assessment Key audit matter How our audit addressed the key audit matter Refer to Note 13 Intangible Assets including goodwill. We evaluated the appropriateness of management’s identification ofthe Group’s CGUs, related control activities and the process by Goodwill and indefinite-lived intangible assets (franchise agreements which management prepared the CGUs’ value-in-use calculations. and trademarks) as at 31 December 2021 amount to €1,759.3 million and €269.6 million, respectively. We tested the mathematical accuracy of the CGUs’ value-in-use calculations and compared the cash flow projections included therein The above amounts have been allocated to individual cash-generating to the financial budgets approved by the Board of Directors, covering units (CGUs), which in accordance with International Accounting a one-year period and management’s projections for the subsequent Standard (IAS) 36 require the performance of an impairment four years. In addition, we assessed the reliability of the cash flow assessment at least annually, or whenever there is an indication of projections by comparing key elements of the prior year projections impairment. The impairment assessment involves the determination with actual results. of the recoverable amount of the CGU, being the higher of the value-in-use and the fair value less costs to sell. We challenged management’s cash flow projections in relation to theassumptions applied to the value‑in‑use calculations focusing This area was a key matter for our audit due to the size of the goodwill onfuture performance in light of the gradual recovery from the and indefinite-lived intangible assets balances and because the COVID-19 pandemic with respect to short-term and long-term determination of whether elements of goodwill and of indefinite-lived revenue growth rates and the level of costs. intangible assets are impaired involves complex and subjective estimates and judgements made by management about the future With the support of our valuation specialists, we assessed the results of the CGUs. These estimates and judgements include appropriateness of certain assumptions including discount, annual assumptions surrounding revenue growth rates, costs, foreign revenue growth, perpetuity revenue growth and foreign exchange exchange rates and discount rates. rates.We also evaluated management’s assessment of the potential effect of climate change to the cost of water. Furthermore, the COVID-19 pandemic, macroeconomic volatility, competitor activity and regulatory/fiscal developments could We performed our independent sensitivity analyses on the key drivers adversely affect each CGU and potentially the carrying amount of the value-in-use calculations for the CGUs with significant balances ofgoodwill and indefinite‑lived intangible assets. of goodwill and indefinite-lived intangible assets. Management has identified the Italy CGU to be sensitive to possible As a result of our work, we found that the determination by changes in the assumptions used, which could result in the calculated management that no impairment was required for goodwill and recoverable amount being lower in future periods than the carrying indefinite-lived intangible assets was supported by assumptions value of the CGU. Additional sensitivity disclosure has been included within reasonable ranges. in the consolidated financial statements in respect of this CGU. We assessed the appropriateness and completeness of the related No impairment charge was recorded in 2021. disclosures in Note 13, as regards to goodwill and indefinite-lived intangible assets, and considered them to be reasonable. ### Uncertain tax positions Key audit matter How our audit addressed the key audit matter Refer to Note 10 Taxation and Note 29 Contingencies. In order to understand and evaluate management’s judgements, weconsidered the status of current tax authority inspections The Group operates in numerous tax jurisdictions and is subject to andenquiries, the outcome of previous tax authority inspections, periodic tax inspections by local tax authorities, in the normal course judgemental positions taken in tax returns and current year estimates ofbusiness, on a range of tax matters in relation to corporate tax, as well as recent developments in the tax jurisdictions in which the transfer pricing and indirect taxes. Group operates. As at 31 December 2021, the Group has current tax liabilities We challenged management’s key assumptions, particularly in cases of€80.1million, which include €52.6 million of provisions for tax where there had been significant developments with tax authorities. uncertainties. Our component audit teams, through the use of tax specialists with The impact of changes in local tax regulations and ongoing local knowledge and relevant expertise, assessed the tax positions inspections by local tax authorities could materially impact the taken by the subsidiary in scope, in the context of applying local tax amounts recorded in the consolidated financial statements. laws and evaluating the local tax assessments. Additionally, with our Where the amount of tax payable is uncertain, the Group establishes group engagement team tax specialists, we further evaluated provisions based on management’s estimates with respect to management’s judgements in respect of estimates of tax exposures thelikelihood of material tax exposures and the probable amount and contingencies in order to assess the adequacy of the Group’s tax ofthe liability. provisions. We consider this a key audit matter given the level of judgements and We held virtual meetings with local management to discuss the uncertainty involved in estimating tax provisions and the complexity individual tax position of the in-scope subsidiaries and with the group of dealing with tax rules and regulations in numerous jurisdictions. engagement team tax specialist for the Group’s overall tax exposure. From the evidence obtained we consider the provisions in relation touncertain tax positions as at 31 December 2021 to be reasonable. Wealso assessed the related disclosures provided in Notes 10 and 29 to the consolidated financial statements and concluded that these are appropriate. 215INTEGRATED ANNUAL REPORT 2021 The impact of the COVID-19 pandemic, which was a key audit matter last year, continued to be an area of focus in light of uncertainty over the effective containment of the pandemic and any potential impact to the Group. The audit procedures performed did not identify any significant impacton the control environment, as a result of the COVID‑19 pandemic and remote working, the recoverability of trade receivables or management’s assessment of the going concern basis of accounting. Having considered the gradual recovery from the COVID-19 pandemic and the audit effort required in 2021 and to the date of this audit report, the impact of the COVID-19 pandemic isnolonger included as a key audit matter. ### Other information in the annual report The Board of Directors is responsible for the other information in the annual report. The other information comprises all information included in the annual report, but does not include the consolidated financial statements, the stand-alone financial statements and the remuneration report of Coca‑Cola HBC AG and our auditor’s reports thereon. Our opinion on the consolidated financial statements does not cover the other information in the annual report and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information in the annual report and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there isamaterial misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. ### Responsibilities of the Board of Directors for the consolidated financial statements The Board of Directors is responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with IFRS and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board ofDirectors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. ### Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law, ISAs and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or intheaggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. A further description of our responsibilities for the audit of the consolidated financial statements is located at the website of EXPERT‑suisse: http://expertsuisse.ch/en/audit‑report‑for‑public‑companies. This description forms part of our auditor’s report. ### Report on other legal and regulatory requirements In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors. We recommend that the consolidated financial statements submitted to you be approved. PricewaterhouseCoopers AG Sandra Boehm Uglow Mei Ling Ow Audit Expert Audit Expert Auditor In Charge Zurich, 23 March 2022 PricewaterhouseCoopers AG is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate andindependent legal entity. Please see www.pwc.com/structure for further details. 216 COCA-COLA HBC ### Swiss statutory reporting continued Report of the statutory auditor to the General Meeting of Coca‑Cola HBC AG Steinhausen (Zug) ## Report on the audit of the financial statements ### Opinion We have audited the financial statements of Coca‑Cola HBC AG (the Company), which comprise the balance sheet as at 31 December 2021, statement of income, cash flow statement and notes for the year then ended, including a summary of significant accounting policies. In our opinion, the accompanying financial statements (pages 219 to 230) as at 31 December 2021 comply with Swiss law and the Company’s articles of incorporation. ### Basis for opinion We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our responsibilities under those provisions andstandards are further described in the “Auditor’s responsibilities for the audit of the financial statements” section of our report. We are independent of the entity in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession and wehave fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. ### Our audit approach ### Materiality The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide reasonable assurance that the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the financial statements as a whole. Overall materiality CHF 32’300’000 Benchmark applied Net assets Rationale for the materiality We chose net assets as the benchmark because, in our view, it is the benchmark which reflects the actual benchmark applied substance of the entity. This is a generally accepted benchmark for ultimate holding companies. 217INTEGRATED ANNUAL REPORT 2021 ### Audit scope We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we considered where subjective judgements were made; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk ofmaterial misstatement due to fraud. We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the entity, the accounting processes and controls, and the industry in which the entity operates. ### Report on key audit matters based on the circular 1/2015 of the Federal Audit ### OversightAuthority We have determined that there are no key audit matters to communicate in our report. ### Responsibilities of the Board of Directors for the financial statements The Board of Directors is responsible for the preparation of the financial statements in accordance with the provisions of Swiss law and the Company’s articles of incorporation, and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Board of Directors is responsible for assessing the entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so. ### Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, theycould reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located at the website ofEXPERT‑suisse: http://expertsuisse.ch/en/audit‑report‑for‑public‑companies. This description forms part of our auditor’s report. 218 COCA-COLA HBC ### Swiss statutory reporting continued ### Report on other legal and regulatory requirements In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists which has been designed for the preparation of financial statements according to the instructions of the Board of Directors. We further confirm that the proposed appropriation of reserves complies with Swiss law and the Company’s articles of incorporation. Werecommend that the financial statements submitted to you be approved. PricewaterhouseCoopers AG Sandra Boehm Uglow Mei Ling Ow Audit Expert Audit Expert Auditor In Charge Zurich, 23 March 2022 Enclosures: • Financial statements (balance sheet, statement of income, cash flow statement and notes) • Proposed appropriation of reserves PricewaterhouseCoopers AG is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate andindependent legal entity. Please see www.pwc.com/structure for further details. INTEGRATED ANNUAL REPORT 2021 219 # Coca-Cola HBC AG, Steinhausen (Zug) Balance sheet | | | As at 31 December CHF thousands | | | --- | --- | --- | --- | | | Note | 2021 | 2020 | | **ASSETS** | | | | | Cash and cash equivalents | | **2,026** | 1,880 | | Short-term receivables from direct and indirect participations | 2.1 | **12,047** | 13,948 | | Receivables from related parties | 1 | **338** | 1,677 | | Short-term receivables from third parties | 1 | **1,491** | 1,223 | | **Total current assets** | | **15,902** | **18,728** | | Investments in subsidiaries | 2.2 | **6,710,376** | 6,966,457 | | Property, plant and equipment (incl. right-of-use assets) | | **4,936** | 1,875 | | **Total non-current assets** | | **6,715,312** | **6,968,332** | | **Total assets** | | **6,731,214** | **6,987,060** | | **LIABILITIES AND SHAREHOLDERS' EQUITY** | | | | | Trade payables due to third parties | | **1,713** | 1,192 | | Short-term liabilities to direct and indirect participations | 2.3 | **3,149** | 4,140 | | Short-term lease liabilities | | **704** | 397 | | Accrued expenses | 2.3 | **47,743** | 28,735 | | **Total short-term liabilities** | | **53,309** | **34,464** | | Long-term interest-bearing liabilities to indirect participations | 2.4 | **204,482** | 223,668 | | Long-term lease liabilities | | **2,127** | 507 | | Provisions | 2.5 | **15,987** | 10,519 | | **Total long-term liabilities** | | **222,596** | **234,694** | | Share capital | 2.6 | **2,491,029** | 2,482,434 | | Legal capital reserves | | | | | Reserves from capital contributions | | **3,982,078** | 4,229,620 | | Reserves for treasury shares | 2.7 | **85,298** | 85,298 | | Retained earnings | | | | | Results carried forward | | **18,260** | 42,803 | | Loss for the year | | **(33,852)** | (24,543) | | Treasury shares | 2.7 | **(87,504)** | (97,710) | | **Total shareholders' equity** | 2.8 | **6,455,309** | **6,717,902** | | **Total liabilities and shareholders' equity** | | **6,731,214** | **6,987,060** | 220 COCA-COLA HBC # Swiss statutory reporting*continued* # Coca-Cola HBC AG, Steinhausen (Zug) Statement of income | | Year ended 31 December | | | | --- | --- | --- | --- | | | CHF Unsounds | | | | | Note | 2021 | 2020 | | Dividend income | | **256,081** | 247,408 | | Other operating income | 2.9 | **38,320** | 23,938 | | **Total operating income** | | **294,401** | **271,346** | | Employee costs | 2.10 | **(48,278)** | (27,428) | | Other operating expenses | 2.11 | **(16,585)** | (13,114) | | Write down of investments | 2.2 | **(256,081)** | (247,408) | | Depreciation on property, plant and equipment (incl. right-of-use assets) | | **(743)** | (565) | | **Total operating expenses** | | **(321,687)** | **(288,515)** | | **Operating loss** | | **(27,286)** | **(17,169)** | | Finance costs | | **(6,403)** | (7,199) | | **Loss before tax** | | **(33,689)** | **(24,368)** | | Direct taxes | | **(163)** | (175) | | **Loss for the year** | | **(33,852)** | **(24,543)** | INTEGRATED ANNUAL REPORT 2021 221 # Coca-Cola HBC AG, Steinhausen (Zug) Cash flow statement | | Year ended 31 December | | | --- | --- | --- | | | CHF thousands | | | | Note | 2021 | | Loss for the year | | (33,852) | | Depreciation property, plant and equipment | | 743 | | Finance costs | | 6,403 | | Write down of investments | 2.2 | 256,081 | | Net change related to employee performance share plan | | 22,376 | | | | 12,633 | | | | 241,262 | | Decrease/(increase) in receivables | | 2,972 | | Decrease in investments in subsidiaries | 2.2 | (256,081) | | Decrease in short-term liabilities (excl. financial liabilities) | | (631) | | Increase/(decrease) in accrued expenses | | 12,416 | | Increase in provisions | | 160 | | Proceeds from dividends received from subsidiaries | 2.2 | 256,081 | | Tax paid | | (181) | | **Net cash inflow from operating activities** | | **266,487** | | | | **238,079** | | Payments for purchases of property, plant and equipment | | (1,471) | | **Cash outflow from investing activities** | | **(1,471)** | | | | **(106)** | | Principal repayments of lease obligations | | (405) | | Proceeds from long-term financial liabilities | | 5,708 | | Repayments of long-term financial liabilities | | (24,894) | | Dividends paid to owners of the Company | | (260,250) | | Proceeds from shares issued to employees exercising stock options | | 21,303 | | Interest paid | | (6,244) | | **Net cash outflow from financing activities** | | **(264,782)** | | | | **(236,163)** | | **Net increase in cash and cash equivalents** | | **234** | | | | **1,810** | | **Movement in cash and cash equivalents** | | | | Cash and cash equivalents at 1 January | | 1,880 | | Net increase in cash and cash equivalents | | 234 | | Effect of changes in exchange rates | | (88) | | **Cash and cash equivalents at 31 December** | | **2,026** | | | | **1,880** | 222 COCA-COLA HBC # Swiss statutory reporting continued # Notes to the Financial Statements of Coca-Cola HBC AG, Steinhausen (Zug) ## Introduction Coca-Cola HBC AG ('the Company') was incorporated on 19 September 2012 by Kar-Tess Holding. On 11 October 2012, the Company announced a voluntary share exchange offer to acquire all outstanding ordinary registered shares and all American depositary shares of Coca-Cola Hellenic Bottling Company S.A., Maroussi (GR) ('CCHBC SA'). As a result of the successful completion of this offer, on 25 April 2013 the Company acquired 96.85% of the issued CCHBC SA shares, including shares represented by American depositary shares, and became the new parent company of the Group (the Company and its direct and indirect subsidiaries). On 17 June 2013, the Company completed its statutory buy-out of the remaining shares of CCHBC SA that it did not acquire upon completion of its voluntary share exchange offer. ## 1. Accounting principles ### Accounting principles applied in the preparation of the financial statements These financial statements have been prepared in accordance with the provisions of commercial accounting as set out in the Swiss Code of Obligations (Art. 957 to 963b CO). From 1 January 2021, the Company has prepared its consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) in accordance with Art. 963b CO due to a requirement from the Athens Exchange, its primary listing in the EU. In accordance with Art. 961 para 2, CO, the Company is presenting a cash flow statement. Significant accounting and valuation principles are described below: ### Dividend income Dividend income is recognised when the right to receive payment is established. ### Other operating income The Company provides management services to its principal subsidiaries and acts as guarantor to its principal subsidiary, Coca-Cola HBC Finance B.V. The income from these services is recognised in the accounting period in which the service is provided. ### Exchange rate differences The accounting records of the Company are maintained in Euros and translated to Swiss francs (CHF) for presentation purposes. Except for investments in subsidiaries, property, plant and equipment, long-term liabilities and equity, which are translated at historical rates, all assets and liabilities denominated in foreign currencies are translated into CHF using the closing exchange rate as at 31 December 2021. Income and expenses are translated into CHF at the average exchange rate of the reporting year except for dividend income and related write down of investments (see Note 2.2) which are valued at the transaction date exchange rate. Net unrealised exchange losses are recorded in the income statement, while net unrealised gains are deferred within accrued expenses. | Exchange rates | Balance sheet as at | | Income statement for the year ended | | | --- | --- | --- | --- | --- | | | 31 December 2021 | 31 December 2020 | 31 December 2021 | 31 December 2020 | | EUR | 1.04 | 1.08 | 1.08 | 1.07 | | USD | 0.91 | 0.88 | – | – | | GBP | 1.23 | 1.19 | – | – | ### Leasing disclosures Management has applied an economic-view approach to the disclosure of lease contracts considering the underlying usage rights. Right-of-use assets are presented within property, plant and equipment and depreciated over their useful life. The short- and long-term lease liabilities are adjusted for interest and lease payments. ### Investments in subsidiaries Investments in subsidiaries are valued at historical cost and evaluated for impairment if identified triggering events occur. ### Property, plant and equipment Right-of-use assets are included within property, plant and equipment. Depreciation is calculated on the basis of the following useful lives and in accordance with the following methods: | Property, plant and equipment | Useful life | Method | | --- | --- | --- | | Leasehold improvement (building) | 20 years | 5% linear | | Leasehold improvement (office infrastructure) | 10 years | 10% linear | | Building infrastructure | 12 years | 8.33% linear | | Right-of-use buildings and Company cars | Shorter of useful life and lease term | Linear | | Furniture and fixtures, office equipment and other tangible fixed assets | 8 years | 12.5% linear | | Telephony infrastructure | 7 years | 14.29% linear | | Communication equipment, computers and PCs | 4 years | 29% linear | | Tablets | 3 years | 33.33% linear | INTEGRATED ANNUAL REPORT 2021 223 ## 1. Accounting principles *continued* ### Treasury shares Treasury shares are recognised at acquisition cost and deducted from shareholders' equity at the time of acquisition. If treasury shares are sold, the gain or loss arising is recognised in the income statement as finance income or finance cost as appropriate. ### Receivables from related parties As at 31 December 2021 receivables from related parties are disclosed separate from short-term receivables from third parties. Comparative figures have been reclassified where necessary to conform with changes in presentation in the current year. More specifically, receivables from related parties of CHF 1,677 thousand have been reclassified from 'Short-term receivables from third parties' to 'Receivables from related parties'. ## 2. Information relating to the balance sheet and statement of income ### 2.1 Short-term receivables from direct and indirect participations The short-term receivables from direct and indirect participations do not bear interest. | Name of participation | As at 31 December | | | --- | --- | --- | | | CHF thousands | 2020 | | Coca-Cola Holdings II B.V., Amsterdam | 14 | – | | CCB Management Services GmbH, Vienna | 11,221 | 13,177 | | Coca-Cola HBC Finance B.V., Amsterdam | 606 | 668 | | Coca-Cola Holdings B.V., Amsterdam | 11 | – | | Coca-Cola Hellenic Business Service Organisation, Sofia | 195 | 103 | | **Short-term receivables from direct and indirect participations** | **12,047** | **13,948** | ### 2.2 Investments in subsidiaries | Direct subsidiary | Share of capital | Share of votes | As at 31 December | | | --- | --- | --- | --- | --- | | | | | CHF thousands | 2020 | | Coca-Cola HBC Holdings B.V., Amsterdam | 100% | 100% | 6,966,457 | 7,213,865 | | Write down of investment | | | (256,081) | (247,408) | | **Investments in subsidiaries** | **100%** | **100%** | **6,710,376** | **6,966,457** | 1. Coca-Cola HBC Holdings B.V., Amsterdam was incorporated on 26 June 2013. In 2015 the Company adopted a practice of reducing the value of its investment in Coca-Cola HBC Holdings B.V. by an amount equal to the dividend received from that subsidiary. The amount of the write down in 2021 is equal to the dividend received in August 2021 from Coca-Cola HBC Holdings B.V. of CHF 256,081 thousand (2020: CHF 247,408 thousand). The principal direct and indirect participations of the Company are disclosed in Note 15 to the consolidated financial statements. ### 2.3 Short-term liabilities to direct and indirect participations and accrued expenses The short-term liabilities to the direct and indirect participations do not bear interest except for the liability to Coca-Cola HBC Finance B.V., which is interest-bearing. | Name of participation | As at 31 December | | | --- | --- | --- | | | CHF thousands | 2020 | | CCB Management Services GmbH, Vienna | 1,724 | 2,469 | | Coca-Cola Hellenic Business Service Organisation, Sofia | 74 | 16 | | Coca-Cola HBC Switzerland | 4 | – | | Coca-Cola HBC Finance B.V., Amsterdam | 1,338 | 1,633 | | Coca-Cola HBC Northern Ireland Ltd., Lisburn | – | 6 | | Coca-Cola HBC Services MEPE, Athens | 9 | 16 | | **Total short-term liabilities to direct and indirect participations** | **3,149** | **4,140** | | Accrued expenses | As at 31 December | | | --- | --- | --- | | | CHF thousands | 2020 | | Direct taxes | 188 | 215 | | Management incentive plan and Performance Share Plan for own employees | 15,871 | 7,097 | | Employee-related costs (social security & insurance, payroll taxes) | 4,553 | 3,779 | | Provision for acquiring treasury shares to satisfy subsidiaries' Performance Share Plan rights | 7,542 | 4,293 | | Other accrued expenses | 7,291 | 6,380 | | Net unrealised gains from foreign currency translation | 12,298 | 6,991 | | **Total accrued expenses** | **47,743** | **28,735** | 224 COCA-COLA HBC ## Swiss statutory reporting *continued* Following the publication of circular letter 37a by the Swiss Federal Tax Administration in May 2018, the Company has recognised a provision of CHF 13,563 thousand (2020: CHF 7,848 thousand) that relates to the Company's employees Performance Share Plan, of which CHF 6,975 thousand (2020: CHF 3,672 thousand) is short term and is disclosed in the line item Management Incentive Plan and Performance Share Plan for own employees; while CHF 6,588 thousand (2020: CHF 4,176 thousand) is long term and disclosed in Note 2.5. 'Provisions': The provision for acquiring treasury shares to satisfy subsidiaries' Performance Share Plan rights amounts to CHF 16,117 thousand (2020: CHF 10,152 thousand) of which CHF 7,542 thousand (2020: CHF 4,293 thousand) is short term and disclosed in accrued expenses while CHF 8,575 thousand (2020: CHF 5,859 thousand) is long term and disclosed in Note 2.5. 'Provisions'. ### 2.4 Long-term interest-bearing liabilities | | As at 31 December | | | --- | --- | --- | | | CHF thousands | 2021 | | Coca-Cola HBC Finance B.V., Amsterdam | 204,482 | 223,668 | | **Long-term interest-bearing liabilities** | **204,482** | **223,668** | Long-term interest-bearing liabilities comprise loans from Coca-Cola HBC Finance B.V. received in 2019, 2020 and 2021 for CHF 184,637 thousand (2020: CHF 207,577 thousand) maturing on 8 November 2024; and CHF 19,845 thousand (2020: CHF 16,091 thousand) maturing 21 November 2029. ### 2.5 Provisions | | As at 31 December | | | --- | --- | --- | | | CHF thousands | 2021 | | Long-term Incentive Plan | 330 | 171 | | Provision for acquiring treasury shares to satisfy subsidiaries' Performance Share Plan rights (refer to Note 2.3) | 8,575 | 5,859 | | Performance Share Plan Coca-Cola HBC AG employees (refer to Note 2.3) | 6,588 | 4,176 | | Provision for social security costs of Performance Share Plan | 494 | 313 | | **Provisions** | **15,987** | **10,519** | ### 2.6 Share capital | | Number of shares | Nominal value | Total | | --- | --- | --- | --- | | | | CHF | CHF thousands | | Share capital as at 1 January 2020 | 369,930,157 | 6.70 | 2,478,532 | | Shares issued to employees exercising stock options | 582,440 | 6.70 | 3,902 | | **Share capital as at 31 December 2020** | **370,512,597** | **6.70** | **2,482,434** | | | Number of shares | Nominal value | Total | | --- | --- | --- | --- | | | | CHF | CHF thousands | | Share capital as at 1 January 2021 | 370,512,597 | 6.70 | 2,482,434 | | Shares issued to employees exercising stock options | 1,282,821 | 6.70 | 8,595 | | **Share capital as at 31 December 2021** | **371,795,418** | **6.70** | **2,491,029** | INTEGRATED ANNUAL REPORT 2021 225 ## 2. Information relating to the balance sheet and statement of income *continued* ### 2.7 Treasury shares The number of treasury shares held by Coca-Cola HBC AG and its subsidiaries qualifying under article 659b of the Swiss Code of Obligations and their movements are as follows: | Treasury shares (held by subsidiaries) | Number of shares | Acquisition cost per share | Total | | --- | --- | --- | --- | | | | CHF | CHF thousands | | **Total treasury shares as at 31 December 2020** | **3,430,135** | **24,8673** | **85,298** | | **Total treasury shares as at 31 December 2021** | **3,430,135** | **24,8673** | **85,298** | | Treasury shares held by the Company | Number of shares | Acquisition cost per share | Total | | | | CHF | CHF thousands | | **Treasury shares held by the Company as at 1 January 2020** | **3,228,098** | **35,3599** | **(114,145)** | | Vested PSP shares^{1} | (468,818) | 35,0561 | 16,435 | | **Treasury shares held by the Company as at 31 December 2020** | **2,759,280** | **35,4115** | **(97,710)** | | Treasury shares held by the Company as at 1 January 2021 | 2,759,280 | 35,4115 | (97,710) | | Vested PSP shares^{1} | (294,832) | 34,6160 | 10,206 | | **Treasury shares held by the Company as at 31 December 2021** | **2,464,448** | **35,5066** | **(87,504)** | 1. In March 2020, following the vesting of the 2017 PSP plan, 468,818 treasury shares were transferred to relevant participants. 2. In April 2021, following the vesting of the 2018 PSP plan, 294,832 treasury shares were transferred to relevant participants. ### 2.8 Shareholders' equity | | Share capital | Legal capital reserves | | Retained earnings/ (accumulated losses) | Treasury shares | Total | | --- | --- | --- | --- | --- | --- | --- | | | | Reserves from capital contributions | Reserves for treasury shares/ CHF thousands | | | | | **Balance as at 1 January 2020** | **2,478,532** | **4,470,097** | **85,298** | **42,803** | **(114,145)** | **6,962,585** | | Shares issued to employees exercising stock options | 3,902 | 4,260 | – | – | – | 8,162 | | Dividends | – | (244,737) | – | – | – | (244,737) | | Vested PSP shares | – | – | – | – | 16,435 | 16,435 | | Loss for the year | – | – | – | (24,543) | – | (24,543) | | **Balance as at 31 December 2020** | **2,482,434** | **4,229,620** | **85,298** | **18,260** | **(97,710)** | **6,717,902** | | **Balance as at 1 January 2021** | **2,482,434** | **4,229,620** | **85,298** | **18,260** | **(97,710)** | **6,717,902** | | Shares issued to employees exercising stock options | 8,595 | 12,708 | – | – | – | 21,303 | | Dividends^{2} | – | (260,250) | – | – | – | (260,250) | | Vested PSP shares | – | – | – | – | 10,206 | 10,206 | | Loss for the year | – | – | – | (33,852) | – | (33,852) | | **Balance as at 31 December 2021** | **2,491,029** | **3,982,078** | **85,298** | **(15,592)** | **(87,504)** | **6,455,309** | 1. Represents the book value of treasury shares held by subsidiaries. 2. On 22 June 2021 the shareholders of the Company at the Annual General Meeting approved the distribution of a gross dividend of 80.64 (2020: 40.62) on each ordinary registered share. The dividend was paid on 3 August 2021 and amounted to CHF 260,250 thousand (2020: CHF 244,737 thousand paid 28 July 2020). 226 COCA-COLA HBC # Swiss statutory reporting *continued* ## 2.9 Other operating income | | 2021 | 2020 | | --- | --- | --- | | | CHF thousands | | | Management fees | 35,488 | 20,971 | | Guarantee fee | 2,832 | 2,967 | | **Total other operating income** | **38,320** | **23,938** | Management fees relate to service income earned from services provided to the Company's direct and indirect participations, where of CHF 3,431 thousand is true-up from prior year. Guarantee fee is the income the Company receives for the services provided as guarantor to Coca-Cola HBC Finance B.V. and Nigerian Bottling Company Ltd. ## 2.10 Employee costs | | 2021 | 2020 | | --- | --- | --- | | | CHF thousands | | | Wages and salaries | 21,422 | 12,858 | | Social security costs | 3,172 | 2,853 | | Pensions and employee benefits | 23,684 | 11,717 | | **Total employee costs** | **48,278** | **27,428** | Pension and employee benefits mainly include Performance Share Plan expenses for CCHBC AG employees in the amount of CHF 18,999 thousand (2020: CHF 6,458 thousand). Refer to Note 2.3 for more information. ## 2.11 Other operating expenses Other operating expenses amounting to CHF 16,585 thousand for 2021 (2020: CHF 13,114 thousand) mainly include CHF 14,352 thousand (2020: CHF 11,323 thousand) for management fees to CCB Management Services GmbH, whereof CHF 1,121 thousand is true-up from prior year. ## 3. Other information ### 3.1 Net release of hidden reserves No hidden reserves were released for the years ended 31 December 2021 or 31 December 2020. ### 3.2 Number of employees In 2021 and 2020, on an annual average basis, the number of full-time-equivalent employees did not exceed 50. ### 3.3 Contingent liabilities #### Euro medium-term note programmes In June 2013, the Group established a new €3.0bn Euro medium-term note programme (the 'EMTN programme'). The EMTN programme was updated in September 2014, September 2015 and April 2019, when it was increased to €5.0bn. The EMTN programme was further updated in April 2020 and September 2021. Notes are issued under the EMTN programme through the Company's wholly owned subsidiary Coca-Cola HBC Finance B.V., a private limited liability company established under the laws of the Netherlands, and are fully, unconditionally and irrevocably guaranteed by the Company. In March 2016, Coca-Cola HBC Finance B.V. issued €600m, 1.875%, Euro-denominated notes due in November 2024, which are guaranteed by the Company. In May 2019, Coca-Cola HBC Finance B.V. issued €700m, 1%, Euro-denominated notes due in May 2027 and also issued €600m, 1.625%, Euro-denominated notes due in May 2031, both of which are guaranteed by the Company. In November 2019, Coca-Cola HBC Finance B.V. completed the issue of a €500m Euro-denominated fixed rate bond maturing in November 2029 with a coupon rate of 0.625%, which is guaranteed by the Company. As at 31 December 2021, a total of €2.4bn (2020: €2.4bn) in notes issued under the EMTN programme were outstanding. 227INTEGRATED ANNUAL REPORT 2021 ### 3. Other information continued Committed credit facilities In April 2019, the Group updated its then-existing €500.0m syndicated revolving credit facility (the ‘RCF’), which was set to expire in June 2021. The updated RCF was increased to €800.0m and extended to April 2024 with the option to be further extended for up to two years until April 2026. Coca‑Cola HBC Finance B.V. exercised its extension option and the RCF has been extended to April 2026. The RCF can be used for general corporate purposes and carries floating interest rates. No amounts have been drawn under the RCF since its inception. The borrower under the RCF is the Company’s wholly owned subsidiary Coca‑Cola HBC Finance B.V. and any amounts drawn under the RCF are fully, unconditionally and irrevocably guaranteed by the Company. Commercial paper programme In October 2013 the Group established a new €1.0bn Euro commercial paper programme (the ‘ECP Programme’). The ECP Programme was updated in September 2014, May 2017 and May 2020. Notes are issued under the ECP Programme by Coca‑Cola HBC Finance B.V. and guaranteed by the Company. The outstanding amount under the ECP Programme was €235m as at 31 December 2021 (2020: €200m). Nigerian Bottling Company Ltd In December 2019 the Group established an amortising loan facility of US dollar 85m with maturity in December 2027. The purpose of the facility is to finance the purchase of production equipment by Nigerian Bottling Company Ltd., the Group’s subsidiary in Nigeria. Over the course of 2020 and 2021, the facility has been drawn down for approximately US dollar 78m. The obligations under this facility are guaranteed by the Company. Credit support provider On 18 July 2013, the Company signed as credit support provider to J.P. Morgan Securities plc, Credit Suisse International, Credit Suisse AG, ING Bank N.V., Societe Generale, Merrill Lynch International and The Royal Bank of Scotland plc in favour of Coca‑Cola HBC Finance B.V. for 1 the obligations as defined in the ISDA Master Agreements. On 24 July 2013, the Company signed as credit support provider to the Governor and Company of the Bank of Ireland, in favour of Coca‑Cola 1 HBC Finance B.V. for the obligations as defined in the ISDA Master Agreement. On 8 August 2013, the Company signed as credit support provider to Citibank N.A. in favour of CCHBC Bulgaria AD for the obligations as 1 defined in the ISDA Master Agreement. On 8 August 2013, the Company signed as credit support provider to Citibank N.A. in favour of Coca‑Cola HBC Finance B.V. for the 1 obligations as defined in the ISDA Master Agreement. On 24 June 2014, the Company signed as credit support provider to Intesa Sanpaolo S.pA. in favour of Coca‑Cola HBC Finance B.V. for the 1 obligations as defined in the ISDA Master Agreement. On 5 October 2015, the Company signed as credit support provider to Macquarie Bank International Limited in favour of Coca‑Cola HBC 1 Finance B.V. for the obligations as defined in the ISDA Master Agreement. On 22 June 2016, the Company signed as credit support provider to UniCredit Bank AG in favour of Coca‑Cola HBC Finance B.V. for the 1 obligations as defined in the ISDA Master Agreement. On 31 August 2016, the Company signed as credit support provider to BNP Paribas in favour of Coca‑Cola HBC Finance B.V. for the 1 obligations as defined in the ISDA Master Agreement. On 1 November 2017, the Company signed as credit support provider to Goldman Sachs Global International in favour of Coca‑Cola HBC 1 Finance B.V. for the obligations as defined in the ISDA Master Agreement. On 22 December 2017, the Company signed as credit support provider to Citigroup Global Markets Limited in favour of Coca‑Cola HBC 1 Finance B.V. for the obligations as defined in the ISDA Master Agreement. On 14 February 2018, the Company signed as credit support provider to Morgan Stanley & Co. International PLC in favour of Coca‑Cola HBC 1 Finance B.V. for the obligations as defined in the ISDA Master Agreement. On 25 March 2019, the Company signed as credit support provider to Citigroup Global Markets Europe AG in favour of Coca‑Cola HBC 1 Finance B.V. for the obligations as defined in the ISDA Master Agreement. On 1 July 2019, the Company signed as credit support provider to Credit Suisse Securities, Sociedad de Valores, S.A. in favour of Coca-Cola 1 HBC Finance B.V. for the obligations as defined in the ISDA Master Agreement. On 10 July 2019, the Company signed as credit support provider to Macquarie Bank Limited (London Branch) in favour of Coca‑Cola HBC 1 Finance B.V. for the obligations as defined in the ISDA Master Agreement. On 12 November 2019, the Company signed as credit support provider to UBS AG in favour of Coca‑Cola HBC Finance B.V. for the 1 obligations as defined in the ISDA Master Agreement. On 2 November 2020, the Company signed as credit support provider to J.P. Morgan AG in favour of Coca‑Cola HBC Finance B.V. for the 1 obligations as defined in the ISDA Master Agreement. On 13 November 2020, the Company signed as credit support provider to Goldman Sachs Bank Europe SE in favour of Coca‑Cola HBC 1 Finance B.V. for the obligations as defined in the ISDA Master Agreement. 1. The ISDA (International Swap Dealers Association) Master Agreement is a standardised form issued by the International Swap Dealers Association Inc. to be used for credit supporttransactions. 228 COCA-COLA HBC ### Swiss statutory reporting continued 3.4 Significant shareholders As at 31 December 2021 and 2020, there were two shareholders exceeding the threshold of 5% voting rights in the Company’s share capital. | | Percentage of | | | | Percentage of | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | issued share | | | outstanding share | | | | | Date Number of shares | | | 1 | | | | 2 | | | | capital | | | | capital | | Total Kar‑Tess Holding 31.12.2020 85,355,019 23.0% 23.4% Total Kar‑Tess Holding 31.12.2021 85,355,019 23.0% 23.3% Total shareholdings related to The Coca-Cola Company 31.12.2020 85,112,078 23.0% 23.4% Total shareholdings related to The Coca-Cola Company 31.12.2021 78,252,731 21.0% 21.4% 1. Basis: total issued share capital including treasury shares. Share basis 371,795,418 as at 31 December 2021 (2020: 370,512,597). 2. Basis: total issued share capital excluding treasury shares. Share basis 365,900,835 as at 31 December 2021 (2020: 364,323,182). 3.5 Shareholdings, conversion and option rights The table below sets out a comparison of the interests in the Company’s total issued share capital that the members of the Board of Directors (‘Directors’) and Executive Leadership Team hold (all of which, unless otherwise stated, are beneficial interests or are interests of a person connected with a Director or a member of the Executive Leadership Team) and the interests in the Company’s share capital. 31 December 2021 31 December 2020 | | | Percentage of | | | Percentage of | | | | Percentage of | | Percentage of | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Number of | | issued share | | | outstanding | | Number of | | issued share | | outstanding | | | | | | 1 | | 2 | | shares | | | | | | shares | | capital | | share capital | | | | | capital | share capital | Directors 3 Anastassis G. David – – – – – – Zoran Bogdanovic 193,729 0.05% 0.05% 144,113 0.04% 0.04% Charlotte J. Boyle 1,017 0.00% 0.00% 1,017 0.00% 0.00% 4 Henrique Braun – – – – – – Olusola (Sola) David‑Borha – – – – – – Anna Diamantopoulou – – – – – – William W. (Bill) Douglas III 10,000 0.00% 0.00% 10,000 0.00% 0.00% Reto Francioni 7,000 0.00% 0.00% 7,000 0.00% 0.00% 5 Anastasios I. Leventis – – – – – – 6 Christo Leventis – – – – – – Alexandra Papalexopoulou – – – – – – 7 Bruno Pietracci – – – – – – 8 José Octavio Reyes – – – – – – 9 Alfredo Rivera – – – – – – Ryan Rudolph – – – – – – | | | Percentage of | | | Percentage of | | | | Percentage of | | Percentage of | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Number of | | issued share | | | outstanding | | Number of | | issued share | | outstanding | | | shares | | | 1 | | 2 | | shares | | | | | | | | capital | | share capital | | | | | capital | share capital | Executive Leadership Team Minas Agelidis 50,112 0.01% 0.01% 42,492 0.01% 0.01% Mourad Ajarti 12,496 0.00% 0.00% 10,716 0.00% 0.00% 10 Ben Almanzar 636 0.00% 0.00% – – – Jan Gustavsson 169,298 0.05% 0.05% 144,343 0.04% 0.04% 11 Michael Imellos – – – 156,970 0.04% 0.04% Nikos Kalaitzidakis 44,286 0.01% 0.01% 35,409 0.01% 0.01% Naya Kalogeraki 49,127 0.01% 0.01% 35,864 0.01% 0.01% Martin Marcel 102,403 0.03% 0.03% 82,212 0.02% 0.02% 12 Spyros Mello 37,055 0.01% 0.01% – – – Vitaliy Novikov 29,818 0.01% 0.01% 30,797 0.01% 0.01% Sean O’Neill 3,132 0.00% 0.00% 1,805 0.00% 0.00% Sanda Parezanovic 80,442 0.02% 0.02% 68,817 0.02% 0.02% 13 Barbara Tönz 3,020 0.00% 0.00% – – – Footnotes are presented at the end of Note 3.5. INTEGRATED ANNUAL REPORT 2021 229 ### 3. Other information continued The following table sets out information regarding the stock options and performance shares held by members of the Executive Leadership Team as at 31 December 2021: | | Stock options (ESOP) | | | Performance shares (PSP) | | | | --- | --- | --- | --- | --- | --- | --- | | | Number of stock options | Already vested | Vesting at the end of 2021 | Granted in 2021 | Unvested and subject to performance conditions | Vested | | Zoran Bogdanovic^{14} | 162,477 | 162,477 | – | 97,206 | 327,430 | 48,829 | | Minas Agelidis | – | – | – | 19,093 | 63,427 | 6,046 | | Mourad Ajarti | – | – | – | 13,928 | 36,329 | – | | Ben Almanzar^{13} | – | – | – | 45,192 | 45,192 | – | | Jan Gustavsson | 302,658 | 302,658 | – | 25,169 | 85,483 | 12,790 | | Michael Imelios^{15} | – | – | – | 28,009 | 81,564 | 14,239 | | Nikos Kalaitzidakis | 11,680 | 11,680 | – | 19,139 | 64,995 | 6,825 | | Naya Kalogeraki | 47,784 | 47,784 | – | 37,728 | 92,099 | 10,494 | | Martin Marcel | 38,151 | 38,151 | – | 21,722 | 73,791 | 11,046 | | Spyrlos Mello^{17} | – | – | – | 11,006 | 37,300 | 5,541 | | Vitaliy Novikov | 15,927 | 15,927 | – | 18,902 | 53,966 | 7,100 | | Sean O’Neill | – | – | – | 12,473 | 43,945 | – | | Sanda Parezamovic | 30,794 | 30,794 | – | 20,032 | 68,034 | 9,897 | | Barbara Tóniz^{14} | – | – | – | – | – | – | 1. Basic total issued share capital including treasury shares. Share basis 371,795,418 as at 31 December 2021 (2020: 370,512,597). 2. Basic total issued share capital excluding treasury shares. Share basis 363,900,833 as at 31 December 2021 (2020: 364,323,182). 3. Anastasios G. David is a beneficiary of: (a) a private discretionary trust, for the primary benefit of present and future members of the family of the late Anastasios George Leventis, that has an indirect interest with respect to 85,355,019 shares held by Kar-Tass Holding and (b) a further private discretionary trust, for the primary benefit of present and future members of the family of the late Anastasios George Leventis, that has an indirect interest with respect to 832,268 shares held by An Holdings Limited. 4. Mr. Henrique Braun was appointed to the Board of Directors on 22 June 2021. 5. Anastasios I. Leventis is a beneficiary of: (a) a private discretionary trust, for the primary benefit of present and future members of the family of the late Anastasios George Leventis, that has an indirect interest with respect to 85,355,019 shares held by Kar-Tass Holding and (b) a further private discretionary trust, for the primary benefit of present and future members of the family of the late Anastasios George Leventis, that has an indirect interest with respect to 286,880 shares held by its trustee, Sekine Treuhand AG and (c) a further private discretionary trust, for the primary benefit of present and future members of the family of the late Augie Leventis, that has an indirect interest with respect to 2,138,277 shares held by Concan Holding Limited. 6. Christo Leventis is a beneficiary of: (a) a private discretionary trust, for the primary benefit of present and future members of the family of the late Anastasios George Leventis, that has an indirect interest with respect to 85,355,019 shares held by Kar-Tass Holding and (b) a further private discretionary trust, for the primary benefit of present and future members of the family of the late Anastasios George Leventis, that has an indirect interest with respect to 482,228 shares held by its trustee, Sekine Treuhand AG and (c) a further private discretionary trust, for the primary benefit of present and future members of the family of the late Augie Leventis, that has an indirect interest with respect to 2,138,277 shares held by Concan Holding Limited. 7. Mr. Bruno Pietracci was appointed to the Board of Directors on 22 June 2021. 8. Mr. Jose Octavio Reyes retired from the Board of Directors on 22 June 2021. 9. Mr. Alfredo Rivera retired from the Board of Directors on 22 June 2021. 10. Mr. Ben Almanzar joined the Executive Leadership Team on 1 February 2021. 11. Mr. Michael Imelios employment ceased on 30 June 2021. 12. Mr. Spyrlos Mello joined the Executive Leadership Team on 1 November 2021. 13. Mrs. Barbara Tóniz joined the Executive Leadership Team on 1 May 2021. 14. The Remuneration Committee determined at its meeting in 15 March 2022 that, in line with the terms of the PSP, PSP awards granted to Zoran Bogdanovic in 2019 vested over in aggregate 69,759 shares (including the dividend equivalent shares paid on PSP shares that vested in 2022). 230 COCA-COLA HBC ## Swiss statutory reporting *continued* ### 3.6 Fees paid to the auditor The audit and other fees paid to the auditor are disclosed in Note 8 to the consolidated financial statements. ### 3.7 Conditional capital On 25 April 2013, the shareholders' meeting agreed to the creation of conditional capital in the maximum amount of CHF 245,601 thousand, through issuance of a maximum of 36,657 thousand fully paid-in registered shares with a par value of CHF 6.70 each upon exercise of options issued to members of the Board of Directors, members of the management, employees or advisers of the Company, its subsidiaries and other affiliated companies. The share capital of CHF 2,491,029 thousand as disclosed in the balance sheet differs from the share capital in the commercial register of CHF 2,482,434 thousand as per 31 December 2021 due to the exercise of management options in the course of financial year 2021. | Conditional capital | Number of shares | Book value per share CHF | Total CHF thousand | | --- | --- | --- | --- | | Agreed conditional capital as per shareholders' meeting on 25 April 2013 | 36,656,843 | 6.70 | 245,601 | | Shares issued to employees exercising stock options up until 31 December 2016 | (3,149,493) | 6.70 | (21,102) | | Shares issued to employees exercising stock options in 2017 | (4,122,401) | 6.70 | (27,620) | | Shares issued to employees exercising stock options in 2018 | (1,064,190) | 6.70 | (7,130) | | Shares issued to employees exercising stock options in 2019 | (1,352,731) | 6.70 | (9,063) | | Shares issued to employees exercising stock options in 2020 | (582,440) | 6.70 | (3,902) | | **Remaining conditional capital as at 31 December 2020** | **26,385,588** | **6.70** | **176,784** | | Shares issued to employees exercising stock options in 2021 | (1,282,821) | 6.70 | (8,595) | | **Remaining conditional capital as at 31 December 2021** | **25,102,767** | **6.70** | **168,189** | ### 4. Subsequent events The subsequent events in relation to financial year ended 31 December 2021 are disclosed in Note 31 to the consolidated financial statements. INTEGRATED ANNUAL REPORT 2021 231 ## Proposed appropriation of reserves/declaration of dividend ### 1. Total available reserves | Available reserves | CHF thousands | | --- | --- | | Balance brought forward from previous years | 18,260 | | Net loss for the year | (33,852) | | **Total accumulated losses to be carried forward** | **(15,592)** | | Reserves from capital contributions before distribution | 3,982,078 | | **Total available reserves** | **3,966,486** | ### 2. Proposed declaration of dividend from reserves The Board of Directors proposes to declare a gross dividend of €0.71 on each ordinary registered share with a par value of CHF 6.70 from the general capital contribution reserve. Own shares held directly by the Company are not entitled to dividends. The total aggregate amount of the dividends shall be capped at an amount of CHF 300,000 thousand (the 'Cap'), and thus will reduce the general capital contribution reserve of CHF 3,982,078 thousand, as shown in the financial statements as at 31 December 2021, by a maximum of CHF 300,000 thousand. To the extent that the dividend calculated on €0.71 per share would exceed the Cap on the day of the Annual General Meeting, due to the exchange rate determined by the Board of Directors in its reasonable opinion, the Euro per share amount of the dividend shall be reduced on a pro-rata basis so that the aggregate amount of all dividends paid does not exceed the Cap. Payment of the dividend shall be made at such time and with such record date as shall be determined by the Annual General Meeting and the Board of Directors. ### 3. Proposed appropriation of reserves/declaration of dividend #### Variant 1: Dividend of €0.71 at current exchange rate | As at 31 December 2021 | CHF thousands | | --- | --- | | Reserves from capital contributions before distribution | 3,982,078 | | Proposed dividend of €0.71^{1} | (280,581) | | **Reserves from capital contributions after distribution** | **3,701,497** | #### Variant 2: Dividend if Cap is triggered | As of 31 December 2021 | CHF thousands | | --- | --- | | Reserves from capital contributions before distribution | 3,982,078 | | (Maximum) dividend if cap is triggered^{2} | (300,000) | | **(Minimum) reserves from capital contributions after distribution** | **3,682,078** | 1. Restrictive at an exchange rate of CHF 1.07 per EUR. Assumes that the shares entitled to a dividend amount to 369,330,970. 2. Dividends capped at a total aggregate amount of CHF 300,000 thousand. 232 COCA-COLA HBC ### Swiss statutory reporting continued Report of the statutory auditor to the General Meeting of Coca‑Cola HBC AG Steinhausen (Zug) ## Report of the statutory auditor to the General Meeting ## on the remuneration report 2021 We have audited the remuneration report of Coca‑Cola HBC AG for the year ended 31 December 2021. The audit was limited to the information according to articles 14–16 of the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordinance) on pages 233 to 236 of the remuneration report. ### Board of Directors’ responsibility The Board of Directors is responsible for the preparation and overall fair presentation of the remuneration report in accordance with Swiss law and the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordinance). The Board of Directors is also responsible for designing the remuneration system and defining individual remuneration packages. ### Auditor’s responsibility Our responsibility is to express an opinion on the remuneration report. We conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the remuneration report complies with Swiss law and articles 14–16 of the Ordinance. An audit involves performing procedures to obtain audit evidence on the disclosures made in the remuneration report with regard to compensation, loans and credits in accordance with articles 14–16 of the Ordinance. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatements in the remuneration report, whether due to fraud or error. Thisaudit also includes evaluating the reasonableness of the methods applied to value components of remuneration, as well as assessing theoverall presentation of the remuneration report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. ### Opinion In our opinion, the remuneration report of Coca‑Cola HBC AG for the year ended 31 December 2021 complies with Swiss law and articles 14–16 of the Ordinance. PricewaterhouseCoopers AG Sandra Boehm Uglow Mei Ling Ow Audit Expert Audit Expert Auditor In Charge Zurich, 23 March 2022 INTEGRATED ANNUAL REPORT 2021 233 ## Statutory Remuneration Report ### Additional disclosures regarding the Statutory Remuneration Report The section below is in line with the Ordinance against Excessive Compensation in Listed Stock Companies, which requires disclosure of the elements of compensation paid to the Company's Board of Directors and the Executive Leadership Team (formerly known as the Operating Committee). The amounts relate to the calendar years of 2021 and 2020. In the information presented below, the exchange rate used for conversion of 2021 remuneration data from Euro to CHF is 1/1.0833 and the exchange rate used for conversion of 2020 remuneration data from Euro to CHF is 1/1.0689. As the Company is headquartered in Switzerland, it is required for statutory purposes to present compensation data for two consecutive years, 2021 and 2020. The applicable methodology used to calculate the value of stock option and performance shares follows Swiss Standards. In 2021 and 2020, the fair value of performance shares from the 2021 and 2020 grants is calculated based on the performance share awards that are expected to vest. Below is the relevant information for Swiss statutory purposes. The Statutory Remuneration Report should be read in conjunction with the Directors' remuneration report presented in the Integrated Annual Report as the qualitative aspects of remuneration policy are described therein. ### Remuneration for acting members of governing bodies The Company's Directors believe that the level of remuneration offered to Directors and the members of the Executive Leadership Team should reflect their experience and responsibility as determined by, among other factors, a comparison with similar multinational companies and should be sufficient to attract and retain high-calibre Directors who will lead the Group successfully. In line with the Group's commitment to maximise shareholder value, its policy is to link a significant proportion of remuneration for its Executive Leadership Team to the performance of the business through short- and long-term incentives. Therefore, the Executive Leadership Team members' financial interests are closely aligned with those of the Company's shareholders through the equity-related long-term compensation plan. The total remuneration of the Directors and members of the Executive Leadership Team of the Company, including performance share grants, during 2021 amounted to CHF 27.6m (2020: CHF 22.4m). Out of this, the amount relating to the expected value of performance share awards granted in relation to 2021 was CHF 5.5m (2020: CHF 4.5m). Pension and post-employment benefits for Directors and the Executive Leadership Team of the Company during 2021 amounted to CHF 1.0m (2020: CHF 0.9m). 234 COCA-COLA HBC ### Swiss statutory reporting continued ### Remuneration of the Board of Directors 2021 CHF | | Cash and | | | Cash | | Pension and | | Total fair value of | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | non-cash | | performance | | post-employment | | | stock options at | | Total | | Fees | | 1 | | | | | | | | | | | benefits | | incentives | | | | benefits | thedate granted | compensation | | Anastassis G. David 79,623 – – – – 79,623 2 Zoran Bogdanovic – – – – – – Charlotte J. Boyle 98,472 – – – – 98,472 3 Henrique Braun 39,811 – – – – 39,811 4 Olusola (Sola) David‑Borha 95,330 – – – – 95,330 5 Anna Diamantopoulou 98,472 – – – – 98,472 William W. (Bill) Douglas III 110,930 – – – – 110,930 6 Reto Francioni 115,588 – – – – 115,588 Anastasios I. Leventis 92,189 – – – – 92,189 Christo Leventis 79,623 – – – – 79,623 Alexandra Papalexopoulou 95,330 – – – – 95,330 7 Bruno Pietracci 42,953 – – – – 42,953 8 José Octavio Reyes 42,953 – – – – 42,953 9 Alfredo Rivera 39,811 – – – – 39,811 10 Ryan Rudolph 79,623 – – – – 79,623 Total Board of Directors 1,110,708 – – – – 1,110,708 1. Cash and non‑cash benefits consist of cost‑of‑living allowance, housing support, Employee Stock Purchase Plan, Private Medical Insurance Relocation Expenses, Home Trip Allowance, lump sum expenses and similar allowances. 2. Zoran Bogdanovic’s compensation was based on his role as CEO, member of the Executive Leadership Team, and his employment agreement. Zoran Bogdanovic was not entitled and did not receive additional compensation as a Director. 3. Henrique Braun was appointed to the Board of Directors on 22 June 2021. The Group has applied a half‑year period fee of CHF 39,811. On top of his fees, the Group paid CHF 3,237 in social security contributions as required by Swiss legislation 4. For Olusola (Sola) David‑Borha, on top of her fees, the Group paid CHF 7,752 in social security contributions as required by Swiss legislation. 5. For Anna Diamantopoulou, on top of her fees, the Group paid CHF 8,008 in social security contributions as required by Swiss legislation. 6. For Reto Francioni, on top of his fees, the Group paid CHF 6,932 in social security contributions as required by Swiss legislation. 7. Bruno Pietracci was appointed to the Board of Directors on 22 June 2021. The Group has applied a half‑year period fee of CHF 42,953. On top of his fees, the Group paid CHF 3,493 in social security contributions as required by Swiss legislation. 8. José Octavio Reyes retired from the Board of Directors on 22 June 2021. The Group has applied a half‑year period base fee of CHF 42,953. On top of his fees, the Group paid CHF2,436 in social security contributions as required by Swiss legislation. 9. Alfredo Rivera retired from the Board of Directors on 22 June 2021. The Group has applied a half‑year period base fee of CHF 39,811. 10. For Ryan Rudolph, on top of his fees, the Group paid CHF 6,475 in social security contributions as required by Swiss legislation. Non-Executive Directors do not participate in any of the Group’s incentive plans, nor do they receive any retirement benefits. 235INTEGRATED ANNUAL REPORT 2021 ### Remuneration of the Board of Directors 2020 CHF | | Cash and | | | Cash | | Pension and | | Total fair value of | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | non-cash | | performance | | post-employment | | | performance shares | | Total | | Fees | | 1 | | | | | | | | | | | benefits | | incentives | | | | benefits | at the dategranted | compensation | | Anastassis G. David 78,564 – – – – 78,564 2 Zoran Bogdanovic – – – – – – Charlotte J. Boyle 94,063 – – – – 94,063 3 Olusola (Sola) David‑Borha 94,063 – – – – 94,063 4 Anna Diamantopoulou 48,582 – – – – 48,582 William W. (Bill) Douglas III 109,455 – – – – 109,455 5 Reto Francioni 114,052 – – – – 114,052 Anastasios I. Leventis 90,963 – – – – 90,963 Christo Leventis 78,564 – – – – 78,564 6 Alexandra Papalexopoulou 98,713 – – – – 98,713 7 José Octavio Reyes 84,764 – – – – 84,764 Alfredo Rivera 78,564 – – – – 78,564 8 Ryan Rudolph 78,564 – – – – 78,564 9 John P. Sechi 47,032 – – – – 47,032 Total Board of Directors 1,095,943 – – – – 1,095,943 1. Allowances consist of cost of living allowance, housing support, employee share purchase plan, private medical insurance, relocation expenses, home trip allowance, lump sum expenses and similar allowances. 2. Zoran Bogdanovic’s compensation was based on his role as CEO, member of the Executive Leadership Team, and his employment agreement. Zoran Bogdanovic was not entitled anddidnot receive additional compensation as a Director. 3. For Olusola (Sola) David‑Borha, on top of her fees, the Group paid CHF 7,625 in social security contributions as required by Swiss legislation. 4. Anna Diamantopoulou was appointed to the Board of Directors on 16 June 2020. The Group has applied a half‑year period fee of CHF 48,582. On top of her fees, the Group paid CHF3,939 in social security contributions as required by Swiss legislation. 5. For Reto Francioni, on top of his fees, the Group paid CHF 8,230 in social security contributions as required by Swiss legislation. 6. For Alexandra Papalexopoulou, on top of her fees, the Group paid CHF 3,488 in social security contributions as required by Swiss legislation. 7. For José Octavio Reyes, on top of his fees, the Group paid CHF 4,763 in social security contributions as required by Swiss legislation. 8. For Ryan Rudolph, on top of his fees, the Group paid CHF 6,369 in social security contributions as required by Swiss legislation. 9. John P. Sechi retired from the Board of Directors on 16 June 2020. The Group has applied a half‑year period base fee of CHF 47,032. Non-Executive Directors do not participate in any of the Group’s incentive plans, nor do they receive any retirement benefits. 236 COCA-COLA HBC ### Swiss statutory reporting continued ### Remuneration of the Executive Leadership Team The total remuneration paid to or accrued for the Executive Leadership Team for 2021 amounted to CHF 26.4m. 2021 CHF | | | | | Cash | | | | | | Pension and | | Total fair value of | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | and non-cash | | | | Annual bonus | | | post-employment | | | performance shares | | | Total | | Base salary | 1 | | | | 2 | | accrual | 3 | | | 4 | | 5 | remuneration | | | | | | benefits | | | | | | | benefits | | at the dategranted | | | | Zoran Bogdanovic, Chief Executive Officer 873,862 956,346 992,326 150,796 1,553,290 4,526,620 6 Other current members 4,745,415 6,881,649 4,324,931 814,544 3,973,231 20,739,770 7 Former members 581,082 281,445 263,227 51,623 - 1,177,377 Total Executive Leadership Team 6,200,359 8,119,440 5,580,484 1,016,963 5,526,521 26,443,767 1. Base salary includes non‑compete payments in 2021 to former members of the Executive Leadership Team. 2. Cash and non-cash benefits consist of cost-of-living allowance, housing support, schooling, employee share purchase plan, private medical insurance, relocation expenses, home trip allowance, employer social security contributions, lump sum expenses, all paid and unpaid sign-on bonus, equalisation amounts and similar allowances. 3. The annual bonus accrual for 2021 includes the accrued Management Incentive Plan (MIP) payout, receivable early in 2022 for the 2021 business performance, including amount deferred in shares, employer social security contribution and gross‑up for the tax benefit, of CHF 5,580,484. The monetary value that was paid in 2021 under the MIP reflecting the 2020 business performance is approx. CHF 2,139,756. 4. Members of the Executive Leadership Team participate in the pension plan of their employing entity, as appropriate. 5. Values under long-term incentives represent the fair value of performance shares that are expected to vest for the 2021 grant in order to comply with Swiss reporting guidelines. 6. Ben Almanzar was appointed to the role of Chief Financial Officer on 1 February 2021. Barbara Tönz was appointed to the role of Chief Customer and Commercial Officer on 1 May 2021. Spyros Mello was appointed to the role of Strategy and Transformation Director on 1 November 2021. 7. Michalis Imellos’ s employment ceased on 30 June 2021. The total remuneration paid to or accrued for the Executive Leadership Team for 2020 amounted to CHF 21.3m. 2020 CHF | | | | Cash | | | Cash | | | Pension and | | | Total fair value of | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | and non-cash | | | | performance | | | post-employment | | | performance shares | | | | Total | | Base salary | | | | 1 | | | 2 | | | 3 | | | 4 | remuneration | | | | | benefits | | | incentives | | | | benefits | | at the date granted | | | | | Zoran Bogdanovic, Chief Executive Officer 844,431 730,070 611,368 150,885 1,532,642 3,869,396 5 Other members 5,216,319 5,926,381 2,548,950 751,594 2,972,080 17,415,324 Total Executive Leadership Team 6,060,750 6,656,451 3,160,318 902,479 4,504,722 21,284,720 1. Cash and non-cash benefits consist of cost-of-living allowance, housing support, schooling, employee share purchase plan, private medical insurance, relocation expenses, home trip allowance, employer social security contributions, lump sum expenses and similar allowances. 2. The cash performance incentives represent the monetary value that was paid under MIP in 2020 reflecting the 2019 business performance. 3. Members of the Executive Leadership Team participate in the pension plan of their employing entity, as appropriate. 4. Values under long-term incentives represent the fair value of performance shares that are expected to vest for the 2020 grant in order to comply with Swiss reporting guidelines. 5. Naya Kalogeraki was appointed to the role of Chief Operating Officer on 1 September 2020. Vitaliy Novikov was appointed to the role of Group Commercial & Customer Director on1September 2020. Alain Brouhard’s employment ceased on 30 June 2020. ### Credits and loans granted to governing bodies In 2021, similar to 2020, there were no credits or loans granted to active or former members of the Company’s Board of Directors, members of the Executive Leadership Team or to any related persons. There are no outstanding credits or loans. 237INTEGRATED ANNUAL REPORT 2021 ## Definitions and reconciliations of ## Alternative Performance Measures (APMs) 1 ### 1. Comparable APMs In discussing the performance of the Group, ‘comparable’ measures are used, which are calculated by deducting from the directly reconcilable IFRS measures the impact of the Group’s restructuring costs, the mark-to-market valuation of the commodity hedging activity, acquisition and integration costs and certain other tax items, which are collectively considered as items impacting comparability, due to their nature. More specifically, the following items are considered as items that impact comparability: 1. Restructuring costs Restructuring costs comprise costs arising from significant changes in the way the Group conducts business, such as significant supply chain infrastructure changes, outsourcing of activities and centralisation of processes. These costs are included within the income statement line ‘Operating expenses’. However, they are excluded from the comparable results so that the users can obtain a better understanding of the Group’s operating and financial performance achieved from underlying activity. 2. Commodity hedging The Group has entered into certain commodity derivative transactions in order to hedge its exposure to commodity price risk. Although these transactions are economic hedging activities that aim to manage our exposure to sugar, aluminium, gas oil and plastics price volatility, hedge accounting has not been applied in all cases. In addition, the Group recognises certain derivatives embedded within commodity purchase contracts that have been accounted for as stand-alone derivatives and do not qualify for hedge accounting. The fair value gains and losses on the derivatives and embedded derivatives are immediately recognised in the income statement in the cost of goods sold and operating expenses line items. The Group’s comparable results exclude the gains or losses resulting from the mark-to-market valuation ofthose derivatives to which hedge accounting has not been applied (primarily plastics) and embedded derivatives. These gains or losses arereflected in the comparable results in the period when the underlying transactions occur, to match the profit or loss to that of the corresponding underlying transactions. We believe this adjustment provides useful information related to the impact of our economic risk management activities. 3. Acquisition and integration costs Acquisition costs comprise costs incurred to effect a business combination such as finder’s, advisory, legal, accounting, valuation andother professional or consulting fees as well as changes in the fair value of contingent consideration recorded in the income statement. Integration costs comprise direct incremental costs necessary for the acquiree to operate within the Group. These costs are included within the income statement line ‘Operating expenses’. However, to the extent that they relate to business combinations that have completed orare expected to be completed, they are excluded from the comparable results so that users can obtain a better understanding oftheGroup’s operating and financial performance achieved from underlying activity. 4. Other tax items Other tax items represent the tax impact of (a) changes in income tax rates affecting the opening balance of deferred tax arising during theyear and (b) certain tax‑related matters selected based on their nature. Both (a) and (b) are excluded from comparable after‑tax results so that users can obtain a better understanding of the Group’s underlying financial performance. 1. Comparable APMs refer to comparable cost of goods sold, comparable gross profit, comparable operating expenses, comparable EBIT, comparable EBIT margin, comparable Adjusted EBITDA, comparable tax, comparable net profit and comparable EPS. The Group discloses comparable performance measures to enable users to focus on the underlying performance of the business on a basis which is common to both periods for which these measures are presented. 238 COCA-COLA HBC ### Alternative performance measures continued The reconciliation of comparable measures to the directly related measures calculated in accordance with IFRS is as follows: Reconciliation of comparable financial indicators (numbers in € million except per share data) 2021 | | Cost of | Operating | Adjusted | | | | --- | --- | --- | --- | --- | --- | | | | | | 1 | EPS (€) | | goods sold Gross profit | | expenses EBIT | EBITDA Tax Net profit | | | As reported (4,570) 2,598 (1,833) 799 1,152 (187) 547 1.499 Restructuring costs – – 21 21 21 (5) 17 0.045 Commodity hedging (4) (4) – (4) (4) 1 (3) (0.008) Acquisition and integration costs – – 14 14 14 – 14 0.039 Other tax items – – – – – 3 3 0.009 Comparable (4,574) (2,594) (1,798) 831 1,183 (188) 578 1.584 2020 | | Cost of | Operating | | Adjusted | | | | --- | --- | --- | --- | --- | --- | --- | | | | | 2 | EBITDA Tax Net profit | 1 | EPS (€) | | goods sold Gross profit | | expenses EBIT | | | | | As reported (3,810) 2,322 (1,682) 661 1,059 (179) 415 1.140 Restructuring costs – – 10 10 10 (2) 8 0.022 Commodity hedging 2 2 – 2 2 – 1 0.004 3 Other tax items – – – – – 7 7 0.019 Comparable (3,809) 2,323 (1,672) 672 1,071 (174) 431 1.185 Figures are rounded. 1. Net profit and comparable net profit refer to net profit and comparable net profit respectively after tax attributable to owners of the parent. 2. EBIT for 2020 includes €0.2 million from restructuring within share of results of integral equity method investments. 3. Other tax items for 2020 include €7.2 million regarding net impact from the settlement of the transfer pricing audit for years 2011-2019 in Nigeria (detailed in the ‘Other supplementary information’ section). Reconciliation of comparable EBIT per reportable segment (numbers in € million) 2021 Established Developing Emerging Consolidated EBIT 286 105 409 799 Restructuring costs 15 3 3 21 Commodity hedging (3) (4) 3 (4) Acquisition costs 3 3 8 14 Comparable EBIT 301 107 424 831 2020 Established Developing Emerging Consolidated 4 EBIT 203 97 360 661 Restructuring costs 6 4 1 10 Commodity hedging – 1 – 2 Comparable EBIT 209 102 361 672 Figures are rounded. 4. EBIT for 2020 includes €0.2 million from restructuring within share of results of integral equity method investments. ### 2. FX‑neutral APMs The Group also evaluates its operating and financial performance on an FX-neutral basis (i.e. without giving effect to the impact of variation of foreign currency exchange rates from year to year). FX-neutral APMs are calculated by adjusting prior year amounts for the impact of exchange rates applicable to the current year. FX-neutral measures enable users to focus on the performance of the business on a basis which is not affected by changes in foreign currency exchange rates applicable to the Group’s operating activities from year to year. Themost common FX‑neutral measures used by the Group are: 1. FX-neutral net sales revenue and FX-neutral net sales revenue per unit case FX-neutral net sales revenue and FX-neutral net sales revenue per unit case are calculated by adjusting prior year net sales revenue for theimpact of changes in exchange rates applicable in the current year. 2. FX-neutral comparable input costs per unit case FX-neutral comparable input costs per unit case is calculated by adjusting prior year commodity costs, and more specifically sugar, resin, aluminium and fuel commodity costs, excluding commodity hedging as described above; and other raw materials costs for the impact ofchanges in exchange rates applicable in the current year. INTEGRATED ANNUAL REPORT 2021 239 The calculations of the FX-neutral APMs and their reconciliation to the most directly related measures calculated in accordance with IFRS is as follows: Reconciliation of FX-neutral net sales revenue per unit case (numbers in € million unless otherwise stated) | | 2021 | | | | | --- | --- | --- | --- | --- | | | Established | Developing | Emerging | Consolidated | | Net sales revenue | 2,479 | 1,366 | 3,324 | 7,168 | | Currency impact | — | — | — | — | | FX-neutral net sales revenue | 2,479 | 1,366 | 3,324 | 7,168 | | Volume (m unit cases) | 590 | 416 | 1,407 | 2,413 | | **FX-neutral net sales revenue per unit case (€)** | **4.20** | **3.29** | **2.36** | **2.97** | | | 2020 | | | | | --- | --- | --- | --- | --- | | | Established | Developing | Emerging | Consolidated | | Net sales revenue | 2,175 | 1,171 | 2,786 | 6,132 | | Currency impact | 1 | (14) | (124) | (137) | | FX-neutral net sales revenue | 2,176 | 1,157 | 2,662 | 5,995 | | Volume (m unit cases) | 537 | 412 | 1,187 | 2,136 | | FX-neutral net sales revenue per unit case (€) | 4.05 | 2.81 | 2.24 | 2.81 | Figures are rounded. Reconciliation of FX-neutral input costs per unit case (numbers in € million unless otherwise stated) | | 2021 | 2020 | | --- | --- | --- | | Input costs | 1,955 | 1,554 | | Commodity hedging | 4 | (2) | | Comparable input costs | 1,959 | 1,553 | | Currency impact | — | 10 | | FX-neutral comparable input costs (€) | 1,959 | 1,562 | | Volume (m unit cases) | 2,413 | 2,136 | | **FX-neutral comparable input costs per unit case (€)** | **0.81** | **0.73** | Figures are rounded. ### 3. Other APMs #### Adjusted EBITDA Adjusted EBITDA is calculated by adding back to operating profit the depreciation and impairment of property, plant and equipment, the amortisation and impairment of intangible assets, the employee share option and performance share costs, and items, if any, reported in the line 'Other non-cash items' of the consolidated cash flow statement. Adjusted EBITDA is intended to provide useful information to analyse the Group's operating performance excluding the impact of operating non-cash items as defined above. The Group also uses comparable Adjusted EBITDA, which is calculated by deducting from Adjusted EBITDA the impact of the Group's restructuring costs, acquisition and integration costs and the mark-to-market valuation of the commodity hedging activity. Comparable Adjusted EBITDA is intended to measure the level of financial leverage of the Group by comparing comparable Adjusted EBITDA to Net debt. Adjusted EBITDA and comparable Adjusted EBITDA are not measures of profitability and liquidity under IFRS and have limitations, some of which are as follows: Adjusted EBITDA and comparable Adjusted EBITDA do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; Adjusted EBITDA and comparable Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; although depreciation and amortisation are non-cash charges, the assets being depreciated and amortised will often have to be replaced in the future, and Adjusted EBITDA and comparable Adjusted EBITDA do not reflect any cash requirements for such replacements. Because of these limitations, Adjusted EBITDA and comparable Adjusted EBITDA should not be considered as measures of discretionary cash available to us and should be used only as supplementary APMs. #### Free cash flow Free cash flow is an APM used by the Group and defined as cash generated by operating activities after payments for purchases of property, plant and equipment net of proceeds from sales of property, plant and equipment and including principal repayments of lease obligations. Free cash flow is intended to measure the cash generation from the Group's business, based on operating activities, including the efficient use of working capital and taking into account its net payments for purchases of property, plant and equipment. The Group considers the purchase and disposal of property, plant and equipment as ultimately non-discretionary since ongoing investment in plant, machinery, technology and marketing equipment, including coolers, is required to support day-to-day operations and the Group's growth prospects. The Group presents free cash flow because it believes the measure assists users of the financial statements in understanding the Group's cash-generating performance as well as the availability for interest payments, dividend distribution and own retention. The free cash flow measure is used by management for its own planning and reporting purposes since it provides information on operating cash flows, working capital changes and net capital expenditure that local managers are most directly able to influence. Free cash flow is not a measure of cash generation under IFRS and has limitations, some of which are as follows: free cash flow does not represent the Group's residual cash flow available for discretionary expenditures since the Group has debt payment obligations that are not deducted from the measure; free cash flow does not deduct cash flows used by the Group in other investing and financing activities and free cash flow does not deduct certain items settled in cash. Other companies in the industry in which the Group operates may calculate free cash flow differently, limiting its usefulness as a comparative measure. 240 COCA-COLA HBC ## Alternative performance measures *continued* ### 3. Other APMs *continued* #### Capital expenditure The Group uses capital expenditure as an APM to ensure that its cash spending is in line with its overall strategy for the use of cash. Capital expenditure is defined as payments for purchases of property, plant and equipment plus principal repayments of lease obligations less proceeds from sale of property, plant and equipment. The following table illustrates how Adjusted EBITDA, free cash flow and capital expenditure are calculated: | | 2021 € million | 2020 € million | | --- | --- | --- | | **Operating profit (EBIT)** | **799** | 661 | | Depreciation and impairment of property, plant and equipment, including right-of-use assets | 336 | 388 | | Amortisation of intangible assets | 1 | 1 | | Employee performance shares | 15 | 10 | | **Adjusted EBITDA** | **1,152** | 1,059 | | Share of results of integral equity method investments | (34) | (21) | | Gain on disposals of non-current assets | (28) | (1) | | Cash generated from working capital movements | 196 | 108 | | Tax paid | (142) | (183) | | **Net cash from operating activities** | **1,142** | 962 | | Payments for purchases of property, plant and equipment^{1} | (514) | (419) | | Principal repayments of lease obligations | (63) | (59) | | Proceeds from sales of property, plant and equipment | 36 | 13 | | **Capital expenditure** | **(541)** | (465) | | Net cash from operating activities | 1,142 | 962 | | Capital expenditure | (541) | (465) | | **Free cash flow** | **601** | 497 | Figures are rounded. 1. Payments for purchases of property, plant and equipment for 2021 include €7.1 million (2020: €x) relating to repayment of borrowings undertaken to finance the purchase of production equipment by the Group's subsidiary in Nigeria, classified as 'Repayments of borrowings' in the condensed consolidated cash flow statement. #### Net debt Net debt is an APM used by management to evaluate the Group's capital structure and leverage. Net debt is defined as current borrowings plus non-current borrowings less cash and cash equivalents and financial assets (time deposits, treasury bills and money market funds), as illustrated below: | | As at 31 December | | | --- | --- | --- | | | 2021 € million | 2020 € million | | Current borrowings | 382 | 515 | | Non-current borrowings | 2,556 | 2,610 | | Other financial assets | (835) | (93) | | Cash and cash equivalents | (783) | (1,216) | | **Net debt** | **1,320** | 1,617 | Figures are rounded. INTEGRATED ANNUAL REPORT 2021 241 ## Other supplementary information Effective May 2020, following a re-organisation of Multon's structure, the joint arrangement was reclassified from a joint operation to a joint venture. The table below depicts the Group's growth including the relevant performance of Multon as a joint operation in the current year ('like-for-like'), compared to the prior year: | Net sales revenue per unit case | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | 2021 vs 2020 | Volume | | FX-neutral | | Reported | | | Growth (%) | Total CCH | Total CCH like-for-like | Total CCH | Total CCH like-for-like | Total CCH | Total CCH like-for-like | | Established | 9.9 | 9.9 | 3.7 | 3.7 | 3.8 | 3.8 | | Developing | 0.8 | 0.8 | 17.0 | 17.0 | 15.7 | 15.7 | | Emerging | 18.6 | 20.4 | 5.3 | 5.6 | 0.6 | 0.9 | | **Total Group** | **13.0** | **14.0** | **5.8** | **5.8** | **3.5** | **3.4** | | Net sales revenue | | | | | | --- | --- | --- | --- | --- | | 2021 vs 2020 | FX-neutral | | Reported | | | Growth (%) | Total CCH | Total CCH like-for-like | Total CCH | Total CCH like-for-like | | Established | 13.9 | 13.9 | 14.0 | 14.0 | | Developing | 18.0 | 18.0 | 16.6 | 16.6 | | Emerging | 24.9 | 27.1 | 19.3 | 21.5 | | **Total Group** | **19.6** | **20.6** | **16.9** | **17.9** | In August 2020, Nigerian Bottling Company Ltd ('NBC'), the Group's subsidiary in Nigeria, settled the additional tax assessed by the Nigerian tax authorities ('FIRS') following the completion of their income tax audit for the years 2005-2019 and transfer pricing ('TP') audit for the years 2011-2019. The net impact to the Tax line item in the income statement, following the utilisation of provisions for uncertain tax positions, was €16.5 million, out of which €7.2 million was attributable to the results of the TP audit. This additional tax charge of €16.5 million resulted in a 2.8pp increase of the Group's effective tax rate on a reported basis, for 2020. NBC was audited by the FIRS with respect to TP for the first time since the inception of the TP rules and principles in the country. The TP audit focused on the transactions between NBC and The Coca-Cola Company Group entities ('TCCC') over a 9-year period (2011-2019). The FIRS challenged the prices of concentrate purchased from and the charges for services provided by TCCC to NBC. As a result, the FIRS adjusted NBC's profitability, increasing its taxable base accordingly. The TP audit concluded with a settlement between FIRS and NBC. This increase of NBC's taxable base over this 9-year period amounted to €195 million and resulted in the elimination of accumulated capital allowances of €183 million. In addition, to the extent that the available capital allowances were not sufficient to offset the full impact of the tax adjustment in a certain year, a tax payment was required to be made. Following the settlement, the total tax assessed by the FIRS amounted to €62.7 million, of which €7.6 million was settled in cash and €55.1 million was settled through the elimination of the deferred tax asset relating to the available capital allowances. The FIRS applied Nigerian TP rules and principles to assess tax on a portion of the income earned by TCCC from its transactions with NBC which, the FIRS determined, should have been subject to taxation in Nigeria. The outcome of the TP audit and the additional related tax that was assessed by the FIRS was therefore not associated with the operations of NBC. Consequently, we consider that the income statement impact of this TP audit (net income statement charge of €7.2 million after the utilisation of provisions for uncertain tax positions) distorted users' understanding of the Group's underlying financial performance for 2020 and we therefore excluded it from the comparable after-tax results, by reporting it under 'Other tax matters' for comparability purposes. Having adjusted for this TP audit charge, the Group's effective tax rate on a comparable basis was 28.7% for 2020. 242 COCA-COLA HBC ### Assurance statement ## Independent assurance statement for the 2021 Integrated Annual Report ### To the management and stakeholders of Coca‑Cola HBC AG: denkstatt GmbH was commissioned by Coca‑Cola HBC AG (hereinafter referred to as “the Company”) to provide independent third‑party assurance for the printed and downloadable pdf versions of the Company’s 2021 Integrated Annual Report (hereinafter referred to as “theReport”) in accordance with the AA1000 Assurance Standard. We have reviewed sustainability‑related data and content in the Report. Financial data were not reviewed as part of this engagement. The assurance engagement covered the nature and extent of the Company’s application of the principles of inclusivity, materiality, responsiveness and impact, as described in the AA1000 Series of Standards (AA1000AP, 2018). The application level of the Global Reporting Initiative (GRI) Standards (2016, core option) was verified. denkstatt is an independent professional services company. Our team of experts has extensive professional experience of assurance engagements related to non-financial information and sustainability management, meaning it is qualified to conduct this independent assurance engagement. denkstatt has implemented a certified quality and environmental management system which complies with the requirements of ISO 9001:2015 and ISO 14001:2015, and accordingly maintains a comprehensive quality control system. ### Management responsibilities The Company’s management (Management) is responsible for preparing the Report, statements within it and related online content. Management is also responsible for identifying stakeholders and material issues, defining commitments with respect to sustainability performance, and establishing and maintaining appropriate performance management and internal control systems, from which reported information is derived. Additionally, Management is responsible for establishing data collection and internal control systems to ensure reliable reporting, for specifying acceptable reporting criteria and for selecting data to be collected for the purposes of the Report. Management responsibilities also extend to preparing the Report in accordance with the GRI Standards. ### Assurance provider’s responsibilities Our responsibilities are to: • express our conclusions and make recommendations regarding the nature and extent of the Company’s adherence to the AA1000 Accountability Principles (2018), and • express our conclusions on the reliability of the information in the Report, and whether it is in accordance with the criteria in the GRI Universal Standards (2016). We did not perform any tasks or services for the Company or other clients in 2021 which would lead to a conflict of interest. We were not responsible for the preparation of any part of the Report. ### Scope of assurance, standards and criteria used We have fulfilled our responsibilities to provide appropriate assurance that the information in the Report is free from material misstatements. We planned and carried out our work based on the GRI Standards and the AA1000 Series of Standards. We used the criteria in AA1000AS (AA1000 Assurance Standard v3) to perform a Type 2 engagement and to provide high level of assurance regarding the nature and extent ofthe Company’s adherence to the principles of impact, inclusivity, materiality, and responsiveness. The core option was selected as the application level for the GRI Universal Standards (2016) and verified accordingly. ### Methodology, approach, limitations and scope of work We planned and carried out our work in order to obtain all evidence, information and explanations that we considered necessary to fulfil ourresponsibilities. We completed a wide range of activities in order to gather necessary evidence, including: • Gathering information regarding the Company’s adherence to the principles of impact, inclusivity, materiality, sustainability context, completeness and responsiveness as required by GRI and AA1000, and conducting interviews with members of the executive management, staff from the People and Culture Department, the Legal Affairs Department, the Commercial Department, the Supply Chain Department (including the Procurement team, the Product Quality, Safety and Environment team, the Fleet team and the Cold Drink Equipment team) and the Corporate Affairs and Sustainability Department as well as managers from other Group functions. Inparticular, we verified the management commitment to the above‑mentioned principles, and whether they are embedded at market level, as well as whether systems and procedures are in place to support compliance with these principles. • Key topics in the interviews conducted at Group level related to the materiality analysis, i.e. health and nutrition, responsible marketing, employee wellbeing and engagement, vehicle fleets, corporate governance, business ethics and anti-corruption, sourcing, energy and climate change, cold drink equipment (coolers), TCFD & climate risk assessment, packaging, recycling and waste management, water stewardship, the World Without Waste initiative, #YouthEmpowered and other community programmes, human rights and diversity, business risks and opportunities, and social impact. • Conducting interviews at country headquarters in Belarus, Croatia, Cyprus, Greece, Italy, Nigeria and Russia in order to assure that the information required for the engagement was complete. • Performing audits in nine bottling plants, the majority of which were located in emerging markets: Minsk (Belarus), Zagreb (Croatia), Nicosia(Cyprus), Aigio (Greece), Nogara (Italy), Abuja (Nigeria), Maiduguri (Nigeria), Samara (Russia) and Vladivostok (Russia). • Making enquiries and conducting spot checks to assess the implementation of Company policies (at plant, market and Group level). • Making enquiries and conducting spot checks regarding necessary documentation for assessing the current data collection systems, andthe procedures in place to ensure reliable and consistent reporting from the plants to Group level. INTEGRATED ANNUAL REPORT 2021 243 - • Verifying all three inventory scopes (Scope 1, 2 and 3) as defined by the GHG Protocol (Corporate Standard), including progress against emission reduction targets, reported changes in emissions compared with the baseline years (2010 and 2017) and the figures for absolute emissions and emissions intensity in 2021. - • Verifying the GRI content index, which was published in a separate section of the Company website, to ensure consistency with the requirements of the GRI Standards (core option). - • Conducting additional interviews with four sustainableholders representing different stakeholder groups (i.e., business partners, suppliers, and non-governmental organisations) at the annual stakeholder forum in autumn 2021. The scope of assurance covers all information relevant to sustainability in the Report and focuses on Company systems and activities during the reporting period. Conversely, the following chapters were not covered in the sustainability assurance process: - • Financial Statements and Swiss Statutory Reporting. Due to the Covid-19 pandemic, in-person audits were conducted in the following countries: Croatia, Cyprus, Greece and Russia. Other audits and interviews were conducted virtually, by using video conferencing solutions to facilitate virtual tours of manufacturing plants. ## Conclusions On the basis of our work, we found nothing to suggest that the information in the 2021 Integrated Annual Report or in the 2021 GRI content index is inaccurate or contains material misstatements. Any errors or misstatements identified during the engagement were corrected prior to the Report being published. ## Positive developments - • Sustainability is deeply embedded in the Company culture. This is evident in well-structured, easily accessible guidelines which ensure proper implementation of Company-wide standards, e.g., the Code of Business Conduct, the Inclusion and Diversity Policy, and the Mission 2025 Guidebook. It is also reflected in the organisational structure and across all functions, with a clear set of responsibilities for sustainability strategy, from factory-level to senior management. - • The Company demonstrates a very strong commitment to its goals. Most operations have a strong track record of collecting and documenting sustainability data. Data traceability has significantly improved over recent years, due to well-structured monitoring and reporting processes at plant, market, and Group level, as well as specialised software. - • The Company fully understands the links between business risks and sustainability issues. An excellent risk management system has been developed in recent years. The detailed quantitative analysis of climate-related water risks performed by the Company in 2021, using established tools, can be considered an example of good practice. Procedures for identifying and mitigating risks comprehensively cover sustainability-related risks, e.g., by integrating the climate risk management process in enterprise risk management in line with TCFD recommendations. Specific plans for further progress in aligning with TCFD recommendations in the coming years, such as further quantitative climate risk assessments, demonstrate clear commitment to the issue. - • The Company has made great progress over the last year on increasing the number of suppliers that undergo environmental, social, and corporate governance (ESG) assessment using EcoVadis and other tools. In order to further increase positive developments along the value chain, supplier-specific dialogues on sustainability-related expectations and areas for improvement should be implemented, as well as monitoring for actions taken. - • In 2021 the Company further improved reporting procedures in respect of breaches of the Code of Business Conduct, such as discrimination. This included special training programmes. These efforts are reflected in the development of reporting and in the measures implemented. - • The Company has put great effort into developing the #YouthEmpowered programme by increasing numbers of participants as well as establishing a data monitoring and reporting system with a high level of maturity. #YouthEmpowered is the flagship social programme of the Company's Mission 2025 sustainability commitments. It aims to support young people and increase their employability by providing modular education opportunities in soft and/or business skills. In 2022 the Company will further refine the #YouthEmpowered programme with regard to the curriculum and training intensity. - • The deployment of Behaviour Based Safety (BBS) programmes throughout the Group is a highly positive, impactful development in the area of health and safety. ## Findings and conclusions regarding adherence to the AA1000 principles of inclusivity, materiality, responsiveness, impact, and specific performance-related information: ### Inclusivity - • Group level: The Company has implemented a comprehensive and efficient stakeholder engagement process at Group level. Its cornerstones are the annual internal and external materiality survey and the Annual Stakeholder Forum (held online in 2021). - • Market and plant level: Stakeholder engagement activities at market and plant level are in greater evidence – and, especially during the Covid-19 pandemic, resulted in new approaches to stakeholder engagement (e.g., virtual stakeholder forums). The Company is well aware of stakeholder concerns, and it consistently integrates the views of stakeholders at all levels. 244 COCA-COLA HBC ### Assurance statement continued ### Materiality • Group level: A robust process for defining topics material to the Company is in place. The materiality assessment process considers stakeholder expectations with regard to relevant topics. Moreover, the Company considers its impact on society and the environment inthe materiality assessment, as required by the GRI Standards. The material topics identified during the assessment in 2021 provided thebasis for the sustainability strategy and reporting. • Market and plant level: As various markets are publishing sustainability reports in combination with socio‑economic impact studies, formalised processes for carrying out the materiality assessment have been more strongly implemented throughout the organisation. Ourrecommendation is to continue with the ‘double materiality’ concept as well as work to combine the two perspectives – financial materiality, and environmental and social materiality – with a risks and opportunities assessment from both the financial and non‑financialperspectives. ### Responsiveness • The Company demonstrated a proactive, fast, and professional response to the health and safety challenges that arose due to the pandemic, in order to protect employees and business partners. • Specific measures were taken to provide support for employees during the pandemic, including support for emotional, mental, andphysical wellbeing, e.g., through the Employee Assistance Programme (EAP). • External stakeholders were also supported, e.g., by focussing the #YouthEmpowered programme on HORECA workers, or donating products and financial contributions to emergency relief during the Covid-19-related lockdown. New formats are being developed toadapt the #YouthEmpowered programme to the pandemic and the progress of digitalisation. ### Impact • Group level: The Company has robust processes in place for understanding, assessing, and managing its impacts, including risk management and strategy development. • Market level: Sound socio‑economic impact studies are conducted in individual markets, on a maximum three‑year local cycle, to measure the organisational impact on communities. Results from these studies are summarised at Group level to disclose the organisation’s impact on stakeholders, the society and on the Company itself. • As part of the Mission 2025 strategy, the Company has published a strong set of commitments with a long-term perspective, covering awide range of environmental and social impact areas along the value chain. In particular, the Company’s commitment to NetZeroby40 demonstrates its ambitious environmental roadmap. ### Additional conclusions and recommendations • The Company demonstrates excellent engagement and know-how in relation to packaging waste management. This competence, combined with a structured approach, reflects ambitious targets in this area. However, efforts need to be increased, since the Company’s 2025 targets for use of recycled PET and/or PET from renewables, as well as packaging collection for recycling, do not currently appear tobe within reach. • The product portfolio is under development, with the integration of new product and service segments such as coffee drinks, snacks, andpremium spirits. The majority of the social and environmental impacts of these new segments have already been included in the scope of ESG assessment, and we recommend further assessment and even stronger integration into the Company’s sustainability managementapproach. • The Company has begun work to include biodiversity topics in its strategy. The newly released biodiversity statement is a very positive development. In order to make a greater impact, we recommend that the Company continues working on the strong implementation andintegration of biodiversity in its strategy. • Since implementation of the 2020 Green Fleet Program the Company has made great progress on transitioning to use of alternative vehicles. To make progress in future towards net-zero transport emissions, we recommend integrating medium and heavy-duty vehicles (trucks) into the Green Fleet roadmap and increasing collaboration in this area with third-party carriers. • The Company should further strengthen workplace accountability practices within its operations, especially in developing markets, focusing on third-party contractors. Willibald Kaltenbrunner Lead Auditor denkstatt GmbH Advisory for Sustainable Development Vienna, 9 March 2022 INTEGRATED ANNUAL REPORT 2021 243 ## Shareholder information We take great pride in being regarded as a transparent and accessible company in all our communications with investment communities around the world. We engage with key financial audiences, including institutional investors, self-side analysts and financial journalists, as well as our Company's shareholders. The investor relations department manages the interaction with these audiences by attending ad hoc meetings and investor conferences throughout the year, in addition to the regular meetings and presentations held at the time of our results announcements. ![img-33.jpeg](img-33.jpeg) ### Listings Coca-Cola HBC AG (LSE: CCH) was admitted to the premium listing segment of the Official List of the UK Listing Authority and to trading on the London Stock Exchange's main market for listed securities on 29 April 2013. With effect from 29 April 2013, Coca-Cola HBC AG's shares are also admitted on the Athens Exchange (ATHEX: EEE). Coca-Cola HBC AG has been included as a constituent of the FTSE 100 and FTSE All-Share Indices from 20 September 2013. London Stock Exchange Ticker symbol: CCH ISIN: CH019 825 1305 SEDOL: B9895B7 Reuters: CCH L Bloomberg: CCH LN Athens Exchange Ticker symbol: EEE ISIN: CH019 825 1305 Reuters: EEE: AT Bloomberg: EEE GA ### Credit rating Standard & Poor's: L/T BBB+, S/T A2, stable outlook Moody's: L/T Baa1, S/T P2, stable outlook ### Share price performance | LSE: CCH | 2021 | 2020 | 2019 | | --- | --- | --- | --- | | In € per share | | | | | Close | 25.55 | 23.77 | 25.65 | | High | 27.84 | 28.83 | 30.74 | | Low | 21.60 | 14.94 | 22.99 | | Market capitalisation (€ million) | 9.348 | 8.660 | 9.318 | | ATHEX: EEE | 2021 | 2020 | 2019 | | In € per share | | | | | Close | 30.26 | 26.42 | 30.17 | | High | 32.80 | 34.24 | 35.09 | | Low | 24.18 | 16.99 | 26.93 | | Market capitalisation (€ million) | 11.071 | 9.625 | 10.960 | Source: Bloomberg ### Share capital In 2021, the share capital of Coca-Cola HBC increased by the issue of 1,282,821 new ordinary shares following the exercise of stock options pursuant to the Group's employee stock option plan. Total proceeds from the issuance of the shares under the stock option plan amounted to €19.6 million. Following the above changes, and including 5,894,583 ordinary shares held as treasury shares, on 31 December 2021 the share capital of the Group amounted to €2,022.3 million and comprised 371,795,418 shares with a nominal value of CHF 6.70 each. ### Major shareholders The principal shareholders of the Group are Kar-Tess Holding (a Luxembourg company), which holds approximately 23%, and The Coca-Cola Company, which indirectly holds approximately 21% of the Group's issued share capital. ### Dividends For 2022, the Board of Directors has proposed a €0.71 dividend per share a 10.9% increase from previous year and increased dividend pay-out ratio target to 40-50%, previously 35-45%. This compares with a dividend payment of €0.64 per share in 2021. For more information on our dividend policy and dividend history, please visit our website at www.coca-colahellenic.com. ### Financial calendar | 12 May 2022 | First quarter trading update | | --- | --- | | 21 June 2022 | Annual General Meeting | | 11 August 2022 | Half-year financial results | | 10 November 2022 | Third quarter trading update | ### Corporate website www.coca-colahellenic.com ### Shareholder and analyst information Shareholders and financial analysts can obtain further information by contacting: Investor Relations Tel: +30 210 618 3100 Email: investor.relations@cchellenic.com IR website: www.coca-colahellenic.com/en/investor-relations ![img-34.jpeg](img-34.jpeg) 246 COCA-COLA HBC ### Glossary Basis points (bps) Comparable operating profit (EBIT) Inventory days One hundredth of one percentage point Comparable operating profit (EBIT) refers to We define inventory days as the average (used chiefly in expressing differences) profit before tax excluding finance income/ number of days an item remains in inventory (costs) and share of results of equity- before being sold, using the following BSO method investments and adjusted for formula: average inventory ÷ cost of goods Business services organisation restructuring costs, acquisition costs and sold x 365 BSS mark to market valuation ofcommodity Ireland Business solutions and systems hedging activity The Republic of Ireland and Northern Ireland CAGR Comparable operating expenditure Italy Compound annual growth rate Comparable operating expenditure refers Territory in Italy served by Coca‑Cola HBC tooperating expenditure adjusted for Capital expenditure or CapEx (excludes Sicily) restructuring costs, acquisition costs Gross CapEx is defined as payments for Joint value creation (JVC) andmark to market valuation of certain purchase of property, plant and equipment. An advanced programme and process commodity hedgingactivity Net CapEx is defined as payments for tocollaborate with customers in order purchase of property, plant and equipment Customer tocreate shared value less receipts from disposals ofproperty, Retail outlet, restaurant or other operation plant and equipment plus principal KPIs that sells or serves Coca‑Cola HBC products repayment of leaseobligations Key Performance Indicators directly to consumers Carbon emissions (Scope 1 and 2) Litre of produced beverage (lpb) Dividend policy Emissions of CO 2 and other greenhouse Unit of reference to show environmental Our Board of Directors approved a dividend gases from fuel combustion and energy performance relative to production volume policy, effective from 2013, aiming to usein Coca‑Cola HBC’s own operations in increase dividend payments progressively Market bottling, storage, distribution and in offices with a medium-term target payout ratio When used in reference to geographic of35‑45% on comparable net profits Carbon footprint areas,a country in which Coca‑Cola HBC Global emissions of CO 2 and other does business DME greenhouse gases from Coca‑Cola HBC’s Direct marketing expenses Mission 2025 wider value chain (raw materials, product 2025 sustainability commitments with Energy use ratio cooling, etc.) their17 goals. Developed in late 2018, they The KPI used by Coca‑Cola HBC to measure CHP arebased on our stakeholder materiality energy consumption in the bottlingplants, Combined heat and power plants matrix and aligned with the United Nations expressed in megajoules ofenergy consumed Sustainable Development Goals (SDGs) and per litre of produced beverage(MJ/lpb) Coca‑Cola brands their targets. The six key focus areas reflect Includes Coca-Cola, Coca-Cola Zero FMCG our value chain: reducing emissions; water andCoca‑Cola Light brands Fast-moving consumer goods use and stewardship; packaging (World Coca‑Cola HBC Future consumption Without Waste); ingredient sourcing; Coca‑Cola HBC AG, and, as the context may A distribution channel where consumers nutrition; and our people and communities require, its subsidiaries and joint ventures; buymulti‑packs and larger packages from NetZeroby40 also, the Group, the Company supermarkets and discounters which are not Long-term commitment to achieving net consumed on the spot | Coca‑Cola System | | zero emissions across our entire value chain | | --- | --- | --- | | The Coca-Cola Company and its | GDP | (Scope 1, 2 and 3) by 2040. Commitment | | bottlingpartners | Gross domestic product | isendorsed by the “We Mean Business” | coalition and published in October 2021 | Cold drink equipment | GRI | | | --- | --- | --- | | A generic term encompassing point-of-sale | Global Reporting Initiative, a global standard | More details on our Scope 1, 2 and 3 | | equipment such as coolers (refrigerators), | for sustainability reporting | emissions are disclosed on p. 38, from our | | vending machines and post-mix machines | | 2021 GRI Content Index: | HoReCa | Comparable adjusted EBITDA | Distribution channel encompassing hotels, | https://www.coca‑colahellenic.com/ | | --- | --- | --- | | We define comparable adjusted EBITDA | restaurants and cafés | content/dam/cch/us/documents/oar/ | | asoperating profit before deductions for | | Coca‑Cola‑HBC‑2021‑GRI‑Content‑Index. | IASB depreciation and impairment of property, pdf.downloadasset.pdf International Accounting Standards Board plant and equipment (included both in cost Please see also our 2021 CDP of goods sold and in operating expenses), IFRS Climateresponse: amortisation and impairment of intangible International Financial Reporting Standards, assets, stock option compensation and issued by the International Accounting https://www.coca‑colahellenic.com/ other non‑cash items, if any; and further Standards Board content/dam/cch/us/documents/a-more- adjusted for restructuring costs, acquisition sustainable-future/strategic-pillars/ IIRC costs and mark tomarket valuation of CDP%20RESPONSE%202021_COCA‑ The International Integrated Reporting commodity hedgingactivity COLA%20HBC%20AG_CLIMATE_ Council, a global coalition of regulators, CHANGE.pdf.downloadasset.pdf | Comparable net profit | investors, companies, standard-setters, | | | --- | --- | --- | | Refers to net profit after tax attributable | theaccounting profession and NGOs. | NetZeroby40 information from our website: | | toowners of the parent adjusted for | Thecoalition is promoting communication | | www.coca-colahellenic.com/en/a-more- restructuring costs, acquisition costs, mark about value creation as the next step in the sustainable-future/netzeroby40 to market valuation of commodity hedging evolution of corporate reporting activity and certain other tax items 247INTEGRATED ANNUAL REPORT 2021 NARTD Shared services TCFD Non-alcoholic ready-to-drink Centre to standardise and simplify key Task Force on Climate-related finance and human resources processes FinancialDisclosures NGOs Non-governmental organisations Sparkling beverages Territory Non-alcoholic carbonated beverages The 28 countries where Coca‑Cola HBC NIST containing flavourings and sweeteners, operates and in which we have bottling NIST is the US National Institute of butexcluding, among others, waters and agreements with The Coca-Cola Company Standards and Technology – a non- flavoured waters, juices and juice drinks, to be their exclusive distribution partner regulatory agencyof the United States sports and energy drinks, teas and coffee Department ofCommerce UNESDA SKU Union of European Soft Drinks Associations Nm3 Stock Keeping Unit Normal cubic metre NSR Unit case (u.c.) Still and water beverages Approximately 5.678 litres or 24 servings, Net sales revenue | | Non-alcoholic beverages without carbonation | atypical volume measurement unit. | | --- | --- | --- | | Operational leverage | including, but not limited to, waters and | ForBambi volume, one unit case | | Operational leverage is the degree to which | flavoured waters, juices and juice drinks, | corresponds to 1 kilogram | | anincrease in a company’s revenues will | sports and energy drinks, teasand coffee | | UN Global Compact (UNGC) result in an increase in comparable EBIT | | Socio‑economic impact | The world’s largest corporate citizenship | | --- | --- | --- | | Organised trade | In conducting socio-economic studies, | initiative which provides a framework for | | Large retailers (e.g. supermarkets, | weuse input‑output modelling to generate | businesses to align strategies with its | | discounters etc.) | estimates of jobs supported and economic | 10principles promoting labour rights, | | | value added. Data we use in this process | humanrights, environmental protection | PET includes our financial information (revenues, andanti‑corruption Polyethylene terephthalate, a form expenses, taxes, sales volume and profits) ofpolyester used in the manufacturing Volume as well as some data from The Coca-Cola ofbeverage bottles Amount of physical product produced Company. While rigorous, the process andsold, measured in unit cases Ready-to-drink (RTD) involves statistical modelling, which should Drinks that are pre-mixed and packaged, Volume share be considered when interpreting and using ready to be consumed immediately with Share of total unit cases sold the results from the studies. Modelling nofurther preparation enables an assessment ofthree key Value share Right Execution Daily (RED) dimensions of impact: Share of total revenue Major Group-wide programme to ensure • Direct: immediate effect in terms Waste ratio in-outlet excellence ofemployment, wages and output The KPI used by Coca‑Cola HBC to measure Receivable days • Indirect: subsequent effect in the supply waste generation in its bottling plants, The average number of days it takes chain expressed in grammes of waste generated tocollect receivables using the following per litre of produced beverage(g/lpb) • Induced: effect caused by staff spend formula: average accounts receivable ÷net ongoods or services Waste recycling sales revenue x 365 • We do not conduct socio-economic The KPI used by Coca‑Cola HBC to measure ROIC studies for all of our markets every year; the percentage of production waste at Return on invested capital. ROIC is the studies are conducted for each market bottling plants that is recycled orrecovered percentage return that a company makes ona rolling basis. In 2021, we updated the Water footprint over its invested capital. We define ROIC studies for seven markets, adding this A measure of the impact of water use, asthe percentage of comparable net profit information to the aggregate results from inoperations or beyond, as defined by the excluding net finance costs divided by the all socio-economic impact studies for the Water Footprint Network methodology capital employed. Capital employed is period 2018-2021. calculated as the average of net debt and Water use ratio Notes to 2021 results from page 9: shareholders’ equity attributable to the The KPI used by Coca‑Cola HBC to measure • Numbers presented are aggregated owners of the parent through the year water use in its bottling plants, expressed based on the local socio-economic studies inlitres of water used per litre ofproduced SAP from Coca‑Cola HBC markets published beverage (l/lpb) A powerful software platform that enables between 2018 and 2021, except for North usto standardise key business processes Working capital Macedonia where the report isfrom 2017. and systems Operating current assets minus operating • All KPIs represent annual impact. current liabilities excluding financing and SDG • Where applicable and relevant in local investment activities UN Sustainable Development Goals. socio-economic studies, the impact On25September 2015, countries adopted #YouthEmpowered (#YE) ofother entities of the Coca‑Cola System aset of 17 goals to end poverty, protect the Flagship programme from our Mission is included planet and ensure prosperity for all aspart 2025sustainability commitments, that aims SSD ofa new sustainable development agenda. to support young people and increase their Sparkling soft drinks Eachgoal has specific targets to be employability by providing modular education achievedby 2030 of soft and/or business skills. Itisdelivered via classroom sessions, virtual training, self Serving e-learning modules, mentoring sessions 237ml or 8oz of beverage, equivalent andother channels handled locallyby to1/24 of a unit case ourmarkets. 248 COCA-COLA HBC ### Special note regarding forward-looking statements This document contains forward-looking statements that involve risks and uncertainties. These statements may generally, but not always, be identified by the use of words such as 'believe', 'outlook', 'guidance', 'intend', 'expect', 'anticipate', 'plan', 'target', 'seek', 'estimates', 'potential' and similar expressions to identify forward-looking statements. All statements other than statements of historical fact, including, among others, statements regarding the future financial position and results: Coca-Cola HBC's outlook for 2021 and future years; business strategy and the effects of the global economic slowdown; the impact of the sovereign debt crisis, currency volatility; Coca-Cola HBC's recent acquisitions, and restructuring initiatives on Coca-Cola HBC's business and financial condition; Coca-Cola HBC's future dealings with The Coca-Cola Company; budgets; projected levels of consumption and production; projected raw material and other costs; estimates of capital expenditure; free cash flow; and effective tax rates and plans and objectives of management for future operations, are forward-looking statements. You should not place undue reliance on such forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they reflect Coca-Cola HBC's current expectations and assumptions about future events and circumstances that may not prove accurate. Forward-looking statements speak only as of the date they are made. Coca-Cola HBC's actual results and events could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in the Risk and materiality section. Although Coca-Cola HBC believes that, as of the date of this document, the expectations reflected in the forward-looking statements are reasonable, Coca-Cola HBC cannot assure that Coca-Cola HBC's future results, level of activity, performance or achievements will meet these expectations. Moreover, neither Coca-Cola HBC, nor its Directors, employees, advisers nor any other person assumes responsibility for the accuracy and completeness of any forward-looking statements. After the date of this Integrated Annual Report, unless Coca-Cola HBC is required by law or the rules of the UK Financial Conduct Authority to update these forward-looking statements, Coca-Cola HBC makes no commitment to update any of these forward-looking statements to conform them either to actual results or to changes in Coca-Cola HBC's expectations. ### About our report The 2021 Integrated Annual Report (the 'Annual Report') consolidates Coca-Cola HBC AG's (also referred to as 'Coca-Cola HBC' or the 'Company' or the 'Group') UK and Swiss disclosure requirements, while meeting the disclosure requirements for its secondary listing on the Athens Exchange. In addition, the Annual Report aims to deliver against the expectations of the Company's stakeholders and sustainability reporting standards, providing a transparent overview of the Group's performance and progress in sustainable development for 2021. Our strategy is designed to deliver responsible, sustainable and profitable growth. This strategy is grounded in our purpose to provide growth for our customers and delight our consumers by nurturing passionate and empowered people as we enrich our communities and care for the environment. Our purpose is directly linked to our strategy and the five growth pillars that guide us as we pursue our objectives and targets. Those growth pillars are: 1. Leverage our unique 24/7 portfolio; 2. Win in the marketplace; 3. Fuel growth through competitiveness and investments; 4. Cultivate the potential of our people; 5. Earn our license to operate. The initiatives we implemented within each of these pillars forms the basis of the narrative of the Integrated Annual Report, which is structured around these five pillars. The Annual Report is for the year ended 31 December 2021, and its focus is on the primary core business of non-alcoholic ready-to-drink beverages across the 29 countries in which we operate. Our website and any other website referred to in the Annual Report are not incorporated by reference and do not form part of the Annual Report. The consolidated financial statements of the Group, included on pages 154-210, have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Coca-Cola HBC AG's statutory financial statements, included on pages 211-236, have been prepared in accordance with the Swiss Code of Obligations. Unless otherwise indicated or required by context, all financial information contained in this document has been prepared in accordance with IFRS. For Swiss law purposes, the annual management report consists of the sections entitled 'Strategic Report', 'Corporate Governance' (without the sub-section 'Director's Remuneration Report'), 'Supplementary Information' and 'Glossary'. The Group uses certain Alternative performance measures (APMs) which provide additional insights and understanding to the Group's underlying operating and financial performance, financial condition and cash flows. A full list of these APMs, their definition and reconciliation to the respective IFRS measures can be found on pages 237-240. This report has been prepared in accordance with the GRI Standards Core option. In addition, the sustainability aspects of this Annual Report comply with the AA1000AS Assurance Standard, and the advanced level requirements for communication on progress against the 10 Principles of the United Nations Global Compact. In addition, the report is aligned with the principles and elements of the International Integrated Reporting Council's (IIRC) framework. Carbon emissions are calculated using the GHG Protocol Corporate Accounting and Reporting Standard methodology. Furthermore, Coca-Cola HBC supports the Task Force on Climate-related Financial Disclosures (TCFD) and reports to the Sustainability Accounting Standards Board (SASB) framework. The sustainability aspects of the Integrated Annual Report have been verified by an independent professional assurance provider as dictated by the Company's Executive Leadership Team (ELT), and you can find the relevant assurance statement on pages 242-244. As with the rest of the information provided, the sustainability aspects of this Annual Report are for the full year ended 31 December 2021 and the related information presented is based on an annual reporting cycle. Scope of the report: environmental and social data includes North Macedonia and Multon joint venture. Snacks manufacturing operations are not included in the environmental and social reporting, unless stated otherwise (due to their very small impact, less than the internal materiality threshold). Relevant impact areas from coffee and premium spirits categories are included in the environmental and social data. We remain committed to strong corporate governance and leadership as well as transparency in our disclosures. We will continue to review our reporting approach and routines, to ensure they meet best practice reporting standards and the expectations of our stakeholders, and provide visibility on how we create sustainable value for the communities we serve.