Coca-Cola Europacific Partners: A Defensive Growth Play in a Volatile Beverage Landscape

Coca-Cola Europacific Partners (CCEP) has demonstrated remarkable resilience in Q2 2025, navigating macroeconomic headwinds with strategic agility and operational discipline. As the world's largest Coca-Cola bottler, CCEP's performance underscores its value as a defensive growth play in the beverage sector, blending regional diversification, pricing power, and shareholder-friendly policies to outperform peers.

Operational Execution: Balancing Regional Challenges with Strategic Gains

CCEP's Q2 results reveal a nuanced picture of market dynamics. While Europe faced headwinds from the French sugar tax and product rationalization (e.g., Capri Sun de-listing), the company offset these with strong Q2 volume growth (+1.2%) driven by favorable Easter timing and improved weather. In APS, Australia/Pacific markets delivered mid-single-digit growth in Coca-Cola Zero Sugar and Energy categories, though Southeast Asia—particularly Indonesia—struggled with macroeconomic and geopolitical pressures.

The company's ability to pivot within constraints is evident in its pricing strategy. Adjusted comparable revenue per unit case rose 4.3% in Q2, reflecting disciplined pricing and promotional optimization. This resilience is critical in an environment where input costs and tax burdens remain elevated.

Market Share Gains: Innovation and Category Leadership

CCEP's focus on innovation and category expansion has solidified its market position. The Energy category, for instance, saw double-digit growth in H1 2025, fueled by new launches like Monster Green and Ultra Ruby Red. Meanwhile, Coca-Cola Original Taste maintained a 59.5% volume share, with Coca-Cola Zero Sugar growing 4.7% year-to-date.

Strategic transitions, such as replacing Nestea with FuzeTea in Iberia, highlight CCEP's agility in aligning with consumer trends. While short-term volume dips occurred in water and RTD tea categories, these were offset by long-term gains in premium and functional beverages.

Long-Term Growth Potential: Diversification and Shareholder Returns

CCEP's geographic and product diversification insulates it from regional downturns. While Indonesia's weak consumer environment impacted APS, gains in Europe's Away from Home (AFH) channel (+1.4% Q2) and Australia's Pacific markets provided balance. This broad footprint reduces reliance on any single market, a critical advantage in a fragmented sector.

Equally compelling is CCEP's capital allocation strategy. The company reaffirmed its €1 billion share buyback program and a ~50% dividend payout ratio, ensuring returns to shareholders while retaining flexibility for reinvestment. With CAPEX targeting ~5% of revenue and a 26% effective tax rate, CCEP balances growth and profitability. Historically, CCEP's stock has shown strong performance following ex-dividend dates, with a 100% win rate over 3 days, 71.43% over 10 days, and 85.71% over 30 days, suggesting consistent short-term gains for investors.

Strategic Resilience: A Case for Defensive Growth

CCEP's reaffirmed 2025 guidance—3–4% revenue growth and ~7% operating profit growth—reflects confidence in its model. Its sustainability achievements, including a 9th consecutive A-list ranking on the Carbon Disclosure Project, further enhance its ESG appeal, a growing priority for institutional investors.

However, risks persist. Indonesia's ongoing challenges and potential regulatory shifts in Europe (e.g., sugar taxes) could pressure margins. Yet, CCEP's innovation pipeline and pricing flexibility position it to mitigate these risks.

Investment Thesis

CCEP offers a rare combination of defensive characteristics and growth potential. Its regional diversification, category leadership, and disciplined capital allocation make it a compelling choice for investors seeking stability in a volatile sector. With a forward P/E of ~14 and a dividend yield of ~3.2%, the stock appears undervalued relative to its long-term growth prospects.

Recommendation: Investors should consider adding CCEP to a diversified portfolio, particularly as macroeconomic uncertainty persists. The company's ability to balance innovation with operational efficiency, coupled with its shareholder-friendly policies and historically strong post-ex-dividend performance, positions it as a resilient growth story in the beverage industry.

In conclusion, Coca-Cola Europacific Partners exemplifies how strategic resilience can transform macroeconomic challenges into opportunities. For those seeking a beverage stock that combines defensive qualities with growth, CCEP's Q2 2025 performance provides a compelling case to act.