COCA COLA HBC LTD (OTC:CCHBF) Q2 2018 Earnings Conference Call August 9, 2018 7:30 PM ET
Executives
Basak Kotler – Investor Relations Director
Zoran Bogdanovic – Chief Executive Officer
Michalis Imellos – Chief Financial Officer
Analysts
Sanjeet Aujla – Credit Suisse
Chris Pitcher – Redburn
Andrew Holland – Société Générale
Richard Felton – Morgan Stanley
Basak Kotler
Good afternoon. Thank you for joining our call today to discuss Coca-Cola Hellenic Bottling Company’s results for the first half of 2018. Today, I am joined by our Chief Executive Officer, Zoran Bogdanovic; and our Chief Financial Officer, Michalis Imellos.
Following the presentation by Zoran and Michalis, we will open the floor to your questions. In order to facilitate a good Q&A session, we suggest that you ask your questions one at a time, waiting for us to answer one question before you ask another. The operator will keep your line open, until we have exhausted all your questions.
Before we get started, I would like to remind everyone that this conference call contains various forward looking statements. These should be considered in conjunction with the cautionary statements on the screen. This information can also be viewed in our press release issued today.
Now let me turn the call over to Zoran.
Zoran Bogdanovic
Thank you Basak. Good afternoon everyone and thank you for joining our half-year results call. I will start by giving an overview of the first six months. Michalis will then take you through our financial performance, before I discuss our operational performance and outlook for 2018.
We delivered a strong set of results in the first half, as the evolution of our portfolio gathers pace. Our new categories, flavors, reformulations and packages are gaining traction across our markets, with 34 million cases of volume in the first half, representing 3.2% of our volume. These new product launches and tailored commercial activation enabled us to capitalize on favorable weather conditions and the FIFA World Cup. Revenue growth, up 6.4% on an FX-neutral basis, accelerated in the second quarter, driven by both volume and price/mix improvements.
Volumes grew in all three of our geographic segments, resulting in 4.6% growth overall. Within this, Sparkling beverages volume was also up 4.6%. I will give you some more color on this in a few minutes. As anticipated, volume growth in Russia and Nigeria came through in the second quarter. FX-neutral revenue per case growth moderated slightly as we cycled price increases taken in Emerging markets in 2017. Nevertheless, the combination of price increases, category and package mix delivered 1.8% improvement.
The investments to support the FIFA World Cup and our revenue growth initiatives resulted in a 30 basis point increase in total marketing expenses as a percentage of revenue. Notwithstanding this increased investment, we delivered a 60 basis point improvement in comparable EBIT margin in the period. Comparable EPS was EUR0.603, up 4.7% on the prior-year period.
With that, I will turn the call over to Michalis.
Michalis Imellos
Thank you, Zoran, and hello everyone. In line with our practice, as I take you through our financial results for the first half of the year, I will refer to comparable figures which exclude the impact of restructuring costs, the mark-to-market valuation impact of commodity hedges and specific non-recurring items.
Volume growth of 4.6% was broad based across the segments and accelerated in the second quarter, supported by new product launches, good weather and FIFA World Cup activations. Both Russia and Nigeria returned to growth in the second quarter and our medium-sized Emerging and Developing segment countries maintained their positive momentum.
Currency-neutral net sales revenue grew by 6.4% in the first half of the year. We are pleased to see reported net sales revenue increasing by 0.5%, despite the resumption of currency depreciation in our emerging markets. Currency neutral revenue per case grew in all segments, up 1.8% overall, with positive contributions from price, package and category mix. Gross profit margin declined by 10 basis points, as the improvement in price/mix did not fully offset the impact from adverse currency movements and the reporting of excise taxes in revenue.
Operating expenses as a percentage of revenue improved by 60 basis points driven by top-line operating leverage, notwithstanding a 30 basis point increase in investments in marketing. We did however, benefit from the cycling of prior year’s bad debt provision in Croatia and partial recovery thereof in the first half of this year, which amounted to 40 basis points in total.
Comparable operating profit increased in the first half by 6.7% compared to the prior-year period, and comparable operating profit margin expanded by 60 basis points to 9.6%. Better price mix, volume and operating leverage, as well as lower input costs drove this positive result. As I have already mentioned, depreciation of our Emerging segment’s currencies resumed in the first half, resulting in a EUR23 million currency headwind. Major drivers were the Nigerian Naira and the Russian Ruble, followed by the weaker Swiss Franc.
Financing cost increased by EUR1.6 million in the period, mainly as a result of lower interest returns on cash deposits. Comparable EPS reached EUR0.60, 4.7% higher than the prior-year period. Working capital balance has improved significantly in the first half compared to the prior-year period. We are on track to reach, once again, our target of triple-digit negative balance for the full year. We generated strong free cash flow of EUR126.8 million in the first half, an improvement of EUR31.7 million year-on-year. Higher operating profit and lower tax payments were partially offset by higher capital expenditure and lower cash generated by working capital movements.
Turning to the revenue performance, volume was the main driver of the 6.4% currency-neutral revenue growth in the first half of the year. The second quarter was the biggest contributor, as the acceleration of our commercial initiatives and the new product launches capitalized on the favorable backdrop presented by good spring and June weather and the FIFA world cup, supporting volumes. In the first half, currency neutral revenue per case growth moderated to 1.8%, driven by a slowdown in the Emerging segment.
In our Established markets, currency neutral revenue per case increased by 1.1%, driven by favorable price mix, as the result of the sugar tax implementation in Ireland, and small price increases selectively taken in other markets, as well as positive category and package mix. In Developing markets, currency neutral revenue per case grew by 0.9%, influenced by higher promotional activity during Easter combined with high Water volume. Favorable impacts from price, category and package mix, were partially offset by negative channel mix.
The Emerging markets saw a slowdown in the currency neutral revenue per case growth, mainly due to the cycling of the price increases taken in Nigeria in 2017. The growth of 3.8% was the result of favorable price, package and category mix, partially offset by adverse channel mix.
Turning to input cost: Currency neutral input cost per case was down by 0.9% in the first half of the year, this is slightly more benign than the guidance we gave in February. The main driver for the input cost improvement was sugar, for which our coverage was very high at rates that represent a low-teens percentage decline compared to the prior year. The very good crop and the abolition of the EU quota regime have led to an oversupplied market, pushing the spot rates to very low levels.
PET prices did increase in the first half of the year, in line with higher oil prices. However, with careful management and certain well-timed pre-buys, we secured better pricing than market spot rates. Aluminium saw rate increases in the first half of the year, but with good management of contracts and favorable hedges, we have minimized the impact.
Turning to our OpEx performance. We have worked hard over the years to right-size our operating cost base, and we continue to use our infrastructure effectively while we grow the topline. In the first half of the year, this resulted in comparable operating expenses reducing to 28.0% of revenue – a 60 basis-point reduction compared to the prior year.
Let me walk you through the key drivers. Sales expenses as % of revenue improved by 70 basis points, driven by the cycling of prior year’s bad debt provision in Croatia and partial recovery thereof in the first half of this year. Administration and other costs as % of revenue improved by 40 basis points, mainly reflecting the good operating leverage effect.
Direct marketing and marketing expenses as % of revenue increased by 30 basis points, to support the new product and flavor launches, the FIFA related commercial activities and other revenue growth management initiatives. Warehouse and distribution expenses as % of revenue grew by 20 basis points, driven by higher costs related to fuel, tariffs and higher volumes sold. As a result, we are pleased with the ongoing strong underlying performance of our operating expenses as a percentage of revenue, especially in view of the growing investments in the market that support the evolution and growth of our business.
Turning to the operating performance, we are reporting comparable operating profit of EUR310.5 million in the first half of the year, 19.4 million higher than in the prior-year period. This is the result of the operating leverage on strong top line growth, with improvements in both volume and price/mix, partly offset by adverse currency movements, mainly in the Emerging markets.
Let me provide you with some more color on the key drivers on a segmental basis: The Established markets segment benefitted from volume growth, favorable price and product mix and lower operating expenses. These were only partially offset by the adverse foreign exchange impact, mainly from the Swiss Franc.
In Developing markets, higher volume sold, favorable price and mix, along with lower operating expenses driven by the cycling of prior year’s bad debt provision in Croatia and partial recovery thereof in the first half of this year, led to an operating profit expansion of EUR23 million.
In Emerging markets, volume growth and improvements in price and mix, partially offset the higher cost of goods sold, higher operating expenses and adverse currency movements. As far as restructuring is concerned: In the first half, we incurred restructuring charges of EUR4 million, mostly focused on Established and Emerging markets.
For the full year, we expect restructuring costs to reach EUR25 million, with estimated annualized benefits of EUR12 million from 2019 onwards. The savings in 2018 from initiatives taken in 2017 and those that will be taken in 2018 are expected to reach EUR11 million.
Turning now to free cash flow, we generated EUR126.8 million in the half year, 31.7 million more than in the prior-year period. Cash flow generation was supported by higher operational profitability and lower tax payments, while net capital expenditure increased by EUR14.6 million. We are investing in the business to support growth. Key areas of the capital expenditure increase in the period were new coolers placements across the majority of our markets, as well as new production equipment, mainly in Nigeria, where we invested in additional capacity to fulfill the growing demand for PET packages.
Before I conclude, let me walk you through the key components of our margin development. The 60 basis point expansion in the EBIT margin can be explained as follows: 80 basis points of margin expansion from volume leverage, based on the 4.6% volume growth in the year, and accounting for some of the volume growth that doesn’t contribute to operating leverage. The best examples are Premium Spirits and non-ready-to-drink Coffee, which are bought and sold as finished goods.
100 basis points expansion from revenue leverage, based on the 1.8% growth in currency neutral revenue per case, and netting off the impact of Premium Spirits and Coffee as above, as well as sugar tax in Ireland, which is added to revenue only to be fully deducted from cost of sales; 10 basis points expansion from our cost productivity initiatives; 70 basis points contraction from the combined impact of currency and input costs; 20 basis points contraction from increased investment in innovation, which is driving our revenue. We also have a 40 basis point headwind from one-off costs. These include increased environmental fees, sugar tax, our investment into the redesign of our revenue growth management framework, partly offset by the positive impact of the Croatian bad debt we have talked about.
With that, let me now pass the floor to Zoran, who will take you through the operational performance for the year.
Zoran Bogdanovic
Thank you Michali. So, overall, first half volume increased as stated by 4.6%, with all three segments contributing positively to volume expansion. We saw the anticipated acceleration in volumes in the Emerging segment, as both Russia and Nigeria returned to volume growth in the second quarter. The 5.1% increase in the half is the fastest growth we have seen in this segment in three years.
Looking at the segments, in Established markets, volume grew by 0.9% with a return to volume growth from Sparkling. Energy and Water also contributed positively, while Juice and RTD Tea declined. Developing markets grew volumes by 8.9%, with all markets showing positive volume growth. Outside of RTD Tea, all categories grew volumes.
In the Emerging markets, where volume grew by 5.1%, Russian volumes were positive in the first half, while Nigeria’s were down marginally. Both countries delivered strong volume growth in the second quarter. In addition, we continued to see very good growth from other countries in the segment, particularly Romania, Ukraine, Serbia and Bulgaria.
Looking at our performance by category: Sparkling volumes increased by 4.6%, growing across all our three segments. In fact, aside from Italy and Nigeria, where Sparkling volumes were down slightly, we grew Sparkling volumes in every single market in the first half. Volume growth, combined with healthy price/mix, resulted in revenue growth of 7.4% for the category. We are very pleased to see that our innovation pipeline of new reformulations, flavors and packages are meeting the consumers’ preferences and adding value to our customers by accelerating growth in this important category.
Trademark Coke is doing very well with a 5.3% rate of growth in the first half. Within this, the fastest growing brand continues to be Coke Zero, which grew by 24.9% with excellent contributions from every market in the business. We are also particularly pleased by the 10% growth in our Adults Sparkling portfolio, which includes brands such as Schweppes, Kinley and newly launched Royal Bliss, and we are encouraged by the strong growth rates we are seeing from the Adults category in the more developed markets. For example, Adults Sparkling grew by low teens in the Established segment and high teens in the Developing segment.
We are also seeing good growth in our Still drinks portfolio. Water grew by nearly 5%, driven by growth in Emerging and very strong growth in the Developing segment, where volumes increased by 20%, while the Established markets volumes were broadly stable. Juice volumes were flattish. Volumes declined in the Established segment, mostly due to large declines in Ireland from the decision to reduce distribution of dilutes. Developing and Emerging segments grew driven by good performance mainly in Poland, Romania and Serbia.
Energy continues to see very good growth and the first half was no exception with volumes up 33.5%. We saw strong growth from both Monster and Burn and in all three segments. RTD Tea declined by 0.6% in the first half but volumes were up by 0.5% in the second quarter; it’s still early days in our territories with the FUZE brand, but I can say that at this stage we’re very pleased by what we’re seeing.
Turning now to our performance by segment and focusing on some of the bigger countries. In our Established markets segment volume was up by 0.9% in the first half of the year. Italy, the main drivers of the small decline were Water and full-sugar Sparkling. We are encouraged to see growth in our strategic areas of focus, such as lights and zeroes. Coke Zero grew 13% and we are also seeing good growth from Fanta Zero and Sprite Zero. Our glass bottle for the HoReCa channel is doing well and we saw good indications from our launch of Royal Bliss. RTD Tea is seeing remarkable results with volumes up 30%; and Energy grew by over 30%, as well.
Volume in Greece grew by mid single digits in the first half, driven by good volume growth in Water, Sparkling and Energy. Within Sparkling we are seeing growth from our no-and-low sugar variants, Coke Zero grew 17% for example. We are also seeing good results from some of the new innovations in that space too, such as Sprite Zero Lemon Mint launched in April and Fanta with Stevia launched in June. Schweppes also benefited from innovation with a new glass bottle and new Lemon and Mastic Mint flavors, contributing to the overall 16% volume growth for the brand.
In Switzerland, volume declined marginally. We saw good performance in Sparkling and particularly in Trademark Coke which grew by 4%. This growth was more than offset by declines in Water, where we took the decision to de-list at a large QSR chain where pricing was undermining profitability, thus not creating value.
The Established segment saw a 1.1% improvement in FX neutral revenue per case, driven by favorable price, category and package mix. In our Developing markets, volume grew by 8.9% with growth in all the markets in the segment and strong volume growth in Sparkling and Water.
In Poland, volume increased by 10% with Sparkling up high single digits and volume growth from all of our brands. Kinley, our Adults sparkling brand in Poland grew by nearly 50%, following the successful launch of a premium bottle. Water volumes were particularly strong in the first half; we have taken the decision to support our Polish water brand Kropla with additional promotion and that has proven very successful.
In the Czech Republic, volume grew by low single digits, with all categories growing except for Water. Sparkling delivered mid single-digit growth and Energy grew by double digits on a strong growth from Monster. Hungary continues to see very strong growth. First half volumes were up high single digits. Sparkling volumes grew high single digits and we saw particularly strong growth from Coke Zero, which was up over 30 percent, boosted by new flavors like Coke Zero Lemon and Coke Zero Cherry. RTD Tea was also strong with volumes up double-digit.
Overall in the segment, favorable price, category and package mix resulted in a 0.9% increase in FX-neutral revenue per case, while channel mix was unfavorable. Volume in our Emerging markets grew by 5.1%, an acceleration from the slight decline in the first quarter, as we saw the anticipated return to growth in Russia and Nigeria in the second quarter.
Volume in Russia was up low single digits in the first half. The NARTD market has returned to growth in Russia in 2018 as the economy shows signs of recovery, and the second quarter saw an acceleration in the growth in the underlying market aided by good weather and the excitement created by the FIFA World Cup. Strong execution and increased promotional activity in a competitive environment supported our growth. Sparkling volumes were up by mid single digits, with Trademark Coke up by high single digits and Fanta up by double digits, helped by the success of Fanta Pear. Our Adult portfolio is also doing well in Russia, with Schweppes up by double digits. RTD Tea returned to growth in the second quarter, but was still down by low single digits for the first half.
Volumes in Nigeria in the first half were down by 0.7% as the strong volume growth in the second quarter recovered nearly all of the volume lost in the first quarter. Sparkling volumes were stable in the first half, and we saw very good growth from our PET packages, as availability of these packs improved. We also benefited from strong demand for Coke Zero and our local brand, Limca. Water volumes declined by low single digits in the first half but grew in the second quarter.
Volume in Romania grew by 11%, with strong results across all categories. Sparkling grew by double digits, with Coke Regular up by high single digits and Fanta up nearly 20%, supported by new flavors like Fanta Grapefruit. Innovation also underpinned the strong results from Schweppes with the launch of new premium bottle and Ginger Ale flavor in April. Water grew high single-digit and Juice double digit with strong growth from both Cappy and Cappy Pulpy.
Currency neutral revenue per case grew by 3.8% in the period, with price/mix growth slowing in the Emerging markets, as expected, as we cycle price increases taken in Nigeria in 2017, and as the inflationary environment in Russia remains benign. Category and package mix also supported currency neutral revenue per case.
In conclusion, we expect the scaling up of the innovations in the second half to continue to support our growth. We are also expecting a better balance between volume growth and price/mix improvements in the full year. Looking ahead to the second half, we expect volume in the Established markets to grow slightly faster, while Developing and Emerging markets moderate their growth compared to the very strong first-half performance.
Our revenue growth management initiatives, selective price increases and lower promotional activity in certain markets are expected to deliver an acceleration in currency neutral net sales revenue per case growth in the second half of the year. Our full year expectation for input costs, on a currency neutral per case basis, is for flattish year-on-year outcome, which is slightly better than our previous guidance of very low single-digit increase.
We also expect the impact of currency movements to be approximately EUR45 million for the full year. This is in line with our previous guidance. Overall, we continue to make good progress against the 2020 targets and expect to deliver another year of revenue growth and profit margin expansion.
With that, I will now hand over to the operator, and Michalis and I will take your questions. Thank you.
Question-and-Answer Session
Operator
We have some questions coming through. The first one comes from Sanjeet Aujla, from Credit Suisse in London. Please go ahead Sanjeet
Sanjeet Aujla
Morning, my first question is just on the revenue growth expectations for the second half of the year Zoran. After the strong H1, do you think the business can deliver a comparable organic revenue performance in the second half of the year? And if you could perhaps just elaborate on the moving parts there? That’s my first question, thanks.
Zoran Bogdanovic
Thank you Sanjeet. So I would like to reiterate our previous and past guidance, which says that we are looking at our full year revenues to be on the pretty same level as the revenue of last year. And as we, both Michalis and me highlighted, we do see that in the second half we do have a generation of our revenue from a more rebalanced mix between the price/mix and volume.
So that means that in the second half we do see slightly lower revenue growth, but on a full year level we are reiterating our guidance that we will be on a similar level like last year.
Sanjeet Aujla
Thanks. And just maybe on the margin dynamics, clearly you expect a step up in price/mix, input costs are a little bit more benign than what we expected, marketing spend is a bit more H1 weighted it seems. So you know do you expect – to what extent do you expect a very strong acceleration in margins for the second half of the year and perhaps if you could just help quantify that? Thanks.
Michalis Imellos
Yes, hi Sanjeet. We do expect acceleration of the margin growth in the second half, exactly for the reasons you outlined. The rebalancing of volume growth and revenue per case growth, in other words the acceleration of the revenue per case growth and the moderation of the volume growth is going to have a positive impact in terms of the acceleration of margin growth.
And also as I mentioned during my prepared comments there were some small one offs in terms of costs that were happening in the first half, we don’t expect those in the second half. And therefore that will also boost the growth in the second half. So overall for the full year we expect total margin growth to accelerate versus what we achieved in the first half of the year, but clearly not to the size of last year’s growth, which we did say included a one off positive impact from the, let’s say positive correction of the ruble.
Sanjeet Aujla
Many thanks Michalis.
Operator
Okay, we have our next question from the line of Chris Pitcher, from Redburn in London. Please go ahead.
Chris Pitcher
Hi there, thank you for taking my questions. The first one is on Italy; could you give us a bit more color on revenue per case development there and how that is playing out for the balance of the year?
And then maybe a comment on Russia and Nigeria pricing into the second half?
And then a specific question, the concentrate purchase from Coca-Cola seems to have increased quite significantly as a percentage of sales in the first half, is that just a timing issue or anything that we should be aware of there? Thank you.
Zoran Bogdanovic
Thank you Chris. First of all you asked about Italy. Italy revenue per case in the first half has been at the lower end of the single digits and we do expect that also on a full year level it is going to be on a similar level. So positive low single digit.
As to pricing in Russia and Nigeria, definitely that is something that we are evaluating. That certainly depends on the macro development, competitive play. However, I want to reiterate that in Emerging Markets we are looking into balanced growth of volume and value. And value creation is definitely critical, that’s why pricing is always one of the options, but we want to be realistic in evaluating and seeing how the market will evolve in the next couple of months and then we will make decisions.
Definitely we also see that in Nigeria as a reminder, while the country is showing some of the positive signs of recovery, still we know that in the country inflation levels are around 13 to 14% and that is also a factor that we are evaluating when making those decisions.
Chris Pitcher
Have you seen any change in behaviour of your main competitor there Seven-Up Bottling since they were taken private, or is it too early to say?
Zoran Bogdanovic
It’s too early to say, we do see that clearly their activities are solely volume focused and that is why what we have been doing over the past 12 to 18 months by bigger proliferation of our packages, as well as brand certification that we are doing with our brand portfolio. This is enabling us – that we can, as we are doing for the last – more than 12 months, are trading at a higher price level than our key competitor, which I would say probably wouldn’t be possible if we were talking two or three years ago. But with this evolution that we are consciously and purposely doing this is enabling us to focus both on the affordable segment as well as the one which can trade at a more premium level.
Michalis Imellos
And Chris to your third question about the concentrate purchases increase. What is different this year compared to last year is Fuze. So when we were buying Nestea last year from BPW, the joint venture between Nestea and the Coca-Cola Company those purchases were not part of concentrate, whereas now as we buy Fuze concentrate fromthe Coca-Cola Company all these purchases are part of concentrate. Therefore that creates a big difference year over year.
Plus of course we have volume growth, significant volume growth and that results in growth in the purchases of concentrate. Plus the fact of course that those purchases that you see are on a cash basis, so small differences in the phasing can generate also distortions to the growth compared to cost of sales.
Chris Pitcher
Thank you very much, very clear.
Operator
We have the next question coming from the line from Andrew Holland, from Société Générale in London. Please go ahead.
Andrew Holland
Hi, just two quick questions, just going back to Sanjeet’s question on the margin, the current consensus is for the same growth as you did in the first half, so 60 basis points. you’re saying it’s going to be less than it was last year, which if I’ve got my modeling right was 90 basis points, so that puts the expectation for the full year in a range of 60 to 90 basis points. Do you think it’s going to be nearer the 60 or the 90 is my first question?
Michalis Imellos
So Andy last year the full year margin growth was 120 basis points, from 8.3 to 9.5 and we had said that out of this around 50 basis points was attributable to the strengthening of the ruble. So we are saying that we will not repeat 120 basis points growth this year, but certainly on a full year basis the growth, the expectation for the margin growth is higher than what we did in the first half of the 60 bps.
Andrew Holland
Okay, thank you. The second question and we get rather fed up asking it, but I’ll ask about CCBA, I’m wondering whether you’ve lost interest in pursuing that or whether that is still an ongoing project?
Zoran Bogdanovic
Thank you Andrew and thank you for bringing this question. You know very well that we don’t comment on these things, on M&A projects. So I can only reiterate – what I always said, is that we are very open and interested in the opportunities that can be ahead. So definitely I confirm that we are very alert and open, but simply on any particular case we are not able to provide any comments. So thank you Andrew.
Andrew Holland
Thank you.
Operator
[Operator Instructions] We have another question coming through it comes from the line of Richard Felton from Morgan Stanley in London. Please go ahead.
Richard Felton
Hi good afternoon, thanks for taking my question. On input costs you mention in your statement that you saw a more benign environment and you’ve lowered your full year guidance. Can you just talk about how you see things progressing into FY 2019 and how you’re currently hedged for your input costs into next year?
Michalis Imellos
Hi Richard, although it’s a little bit early for 2019 as we are drawing our plans now, first of all in terms of coverage we are in very good shape, because in terms of EU sugar we are fully contracted in at rates that are very similar to 2018. And we are also already fully covered in Russia and quite significantly in Nigeria, probably around 70% in Nigeria.
In aluminium we have made already some progress, about a third of our exposures are covered for 2019. And of course for resin there is no hedging or coverage at this point in time.
So taking all that into consideration and the expectations that we have for the commodity rates and we will confirm in February with something more accurate in terms of our expectations, probably we are looking at a low single digit increase for 2019, driven primarily by resin.
Richard Felton
Great thanks. And then just one follow up on your Adult portfolio please, Schweppes and Royal Bliss. Can you talk about where you see the biggest opportunities for those brands please? And then also in your statement you mention that Royal Bliss has been launched in four markets currently, are there plans to roll it out across more of your markets? Thank you.
Zoran Bogdanovic
Thank you Richard. Indeed overall in our Adult portfolio we do see excellent growth opportunity. And that is why we are also expanding the portfolio in this area. And this is where we are also focusing lots of our innovation, both in packaging, as well as flavor extensions.
The opportunity lies in the fact that this Adult portfolio with all three brands is perfectly suitable for various mixability propositions that consumers evidently like and consume more and more in various occasions. And this is where we are consciously developing programs around mixability where we have a quite strong capability that we are spreading across all our markets.
On top of that this portfolio is also suitable for consumption on its own and this is where various flavor innovations also are tapping and coming in very well. So now for – I would say many quarters we do see that this Adult segment is having a strong double-digit growth and I would see that we will be only more intensifying efforts and programs around each segment rather than you know standing still.
To your question about Royal Bliss, it’s an excellent product, launched this year which fits perfectly into that premium segment. That is also verified by customers and consumers. And yes, we will also see how and where we will be also possibly expanding this particular brand into other markets as well.
Richard Felton
Great, thank you very much.
Operator
[Operator Instructions] Yes we have one final question coming through from the line if Chris Pitcher from Redburn in London. Please go ahead.
Chris Pitcher
Hi there, thanks for taking the follow up. I’m just looking at trying to understand Poland’s development in the second half. You obviously had a very strong first half, despite – sorry strong second quarter despite the Easter timing, etc, how should we think about the second half for Poland?
Zoran Bogdanovic
Thank you Chris. First of all we are very pleased with the performance of Poland, which comes also on the basis of a very solid and positive economic backdrop. And also we see that in the market real wage growth which is helping the consumer and the NARTD market is growing mid single digits and we are very pleased that we see that we have been growing ahead of the market, with our growth in the first half which was double digit.
Going forward in Poland we definitely see a continuation of a strong performance in a more rebalanced way between volume and price/mix. So going forward we do see a combination of package mix, category mix, price increases are going to impact price/mix more in the second half than was the case in the first half.
In the first half, as I mentioned in my introductory remarks, we had this conscious drive behind our Water brand, Kropla, and also we did have a stronger Easter impact, which overall impacted the first half more than the first half of last year.
So overall we are looking at a very strong performance for Poland for the full year, just in the second half in a more rebalanced way – how we come to the revenue growth.
Chris Pitcher
Thank you. It bodes pretty well for margin improvement in Poland by the sounds of it in H2 if you’re putting through price and mix.
Zoran Bogdanovic
Yes.
Chris Pitcher
Thank you, very clear.
Operator
There are no further questions and so I will hand you back to Zoran Bogdanovic for any concluding remarks.
Zoran Bogdanovic
Thank you operator. I want to thank you for joining us today and for all your questions that facilitated a good discussion. I will leave you with the following thoughts. In the first six months of the year we made another solid step towards achieving our 2020 financial targets. Looking to the full year we continue to expect to make progress in both revenue and margin growth in 2018. Thank you all and we look forward to speaking with you again soon. Thank you.
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