Is Coca-Cola HBC (LON:CCH) a Compelling Long-Term Buy Amid Strong Earnings Growth and Strategic Momentum?

In the ever-evolving beverage sector, Coca-Cola HBC AG (LON:CCH) stands out as a strategic player with a compelling mix of financial resilience, sustainability leadership, and insider alignment. As investors evaluate long-term opportunities in the non-alcoholic beverage industry, the company's 2024 performance and forward-looking initiatives warrant closer scrutiny. Let's dissect whether CCH is a compelling buy for 2025 and beyond.

Sustainable Growth: A Dual-Track Strategy

Coca-Cola HBC's 2024 annual report paints a picture of disciplined growth. The company achieved 13.8% organic revenue growth, driven by a 2.8% volume expansion and a 10.7% increase in revenue per case. This success stems from targeted pricing strategies and a diversified portfolio that caters to shifting consumer preferences. For instance, its Energy and Coffee categories saw explosive growth (+30.2% and +23.9%, respectively), reflecting a shift toward premium and functional beverages.

Sustainability is not just a buzzword for CCH—it's a business imperative. The company was named the world's most sustainable beverage company by the 2024 Dow Jones Best-in-Class Indices, a recognition tied to its waste reduction, carbon footprint targets, and community engagement. Initiatives like Deposit Return Schemes in Europe and flood relief collaborations with NGOs underscore its ESG-driven operations. These efforts align with the Corporate Sustainability Reporting Directive (CSRD), ensuring regulatory compliance while enhancing brand loyalty among eco-conscious consumers.

Insider Alignment: Confidence in the Long-Term Vision

Insider ownership, though modest at 1.78% of shares outstanding, signals confidence in the company's trajectory. Key insiders, including executives like Zoran Bogdanovic (510,925 shares) and Ivo Bjelis (50,195 shares), have been active buyers in recent months. This activity contrasts with the broader trend of institutional investors, who hold 21.90% of shares, including a massive stake by BlackRock (16.66 million shares). The relatively low insider ownership percentage is offset by the board's emphasis on “We Over I” and “Deliver Sustainable” values, which prioritize long-term value creation over short-term gains.

Coca-Cola HBC's capital allocation strategy further reinforces alignment. The company returned €226 million to shareholders via buybacks in 2024 and increased its dividend by 11%. With a net debt to EBITDA ratio of 1.0x and free cash flow of €712.6 million, CCH demonstrates financial flexibility to reinvest in growth or reward shareholders without overleveraging.

Market Positioning: Leveraging the Coca-Cola Ecosystem

As a key bottler in the Coca-Cola system, CCH benefits from the global brand's 40% market share in non-alcoholic beverages. Its operations span 29 countries in Europe, the Middle East, and North Africa, where it holds exclusive rights to distribute Coca-Cola products. This geographic focus insulates it from direct competition with peers like PepsiCo, while its role in the supply chain ensures steady demand.

However, CCH's competitive edge lies in its agility and innovation. The company has expanded its portfolio to include low-sugar options, plant-based beverages, and coffee brands like Costa, aligning with global health trends. Its 24/7 beverage portfolio strategy—offering products for every occasion—positions it to capture market share in categories like sparkling, energy, and ready-to-drink coffee.

Risks and Considerations

While CCH's fundamentals are strong, investors should remain mindful of macroeconomic risks. FX headwinds in its Emerging segment and input cost volatility could pressure margins in 2025. Additionally, the beverage sector's shift toward health-conscious consumption requires continuous innovation to avoid stagnation.

Investment Thesis: Buy for Sustainable Growth

Coca-Cola HBC's combination of 12.2% organic EBIT growth, robust sustainability credentials, and insider confidence makes it a compelling long-term buy. With a ROIC of 18.3% and a disciplined approach to capital allocation, the company is well-positioned to navigate macroeconomic uncertainty. For investors seeking exposure to the beverage sector's secular trends—premiumization, sustainability, and brand loyalty—CCH offers a balanced mix of growth and stability.

Final Verdict: Coca-Cola HBC is not just a beneficiary of the Coca-Cola brand—it's a strategic operator with a clear vision for sustainable growth. As it executes on its 2025 roadmap, the stock appears undervalued relative to its earnings potential and ESG leadership. For a diversified portfolio, CCH is a buy.