2020
YEAR IN REVIEW A Year of Productivity
2020 ANNUAL REPORT |
1
2
CONA SERVICES OVERVIEW
3
CONA BY THE NUMBERS
4
MESSAGE FROM OUR CEO
6
BOARD OF DIRECTORS
8
PEOPLE & CULTURE
10
SUCCESSFUL 2020 INITIATIVES
12
UPDATE FROM OUR CFO
17
AUDITOR OPINION LETTER
18
STATEMENT OF FINANCIAL POSITION
19
STATEMENT OF OPERATIONS
20
STATEMENT OF MEMBER’S EQUITY
21
STATEMENT OF CASH FLOWS
22
NOTES TO FINANCIAL STATEMENTS
2
| 2020 ANNUAL REPORT
2020
TABLE OF CONTENTS
2020 ANNUAL REPORT |
1
CONA SERVICES OVERVIEW CONA Services was develeoped by bottlers, for bottlers. Bringing a value-based approach to business knowledge and technological advancements, the CONA team is consistently delivering an uncommon experience to bottlers and partners. We are an IT Platform that provides a wide variety of services to ensure our Bottlers gain a productive customer experience while working toward innovating their future.
MISSION To provide advantaged business processes and IT services to its members at the right costs to ultimately support those who are selling Coca-Cola products everyday – “By the bottlers for the bottlers” In short, we pair powerful information technology skills with the equally strong understanding of our bottlers’ businesses to:
Make IT Better! VISION To support growth of our Coca-Cola Bottlers with value driven information technology, anticipating the needs of tomorrow. We want to be our bottlers’ top-rated solution and IT service provider.
2
| 2020 ANNUAL REPORT
BY THE NUMBERS End of Year Cost Per Case
~$0.050 New CAPEX Investment
$27mm
(70% related to new capability) Total IT TCO in % of NSR
1.4% CONA Team
134 Employees
Net Sales Revenue Through CONA
~$24B Capability Investment
37%
total spend on new capability System Availability
99.98% Team Growth
6 New Hires
focused on improving our bench strength for Security & Product Teams
Employee Engagement Score
77.4%
(+4.9% v 2019)
Client Satisfaction Score
4.09 out of 5
(+.2% v 2019)
2020 ANNUAL REPORT |
3
MESSAGE FROM OUR CEO 2020 - A Year of Incredible Change, Challenges and Uncertainty
CONA Services LLC is proud to report that despite a year full of challenges and uncertainty due to COVID-19, we were able to finish 2020 with very positive business results.
Our Bottlers’ business withstood the crisis and grew overall in volume, revenue, and profit. The Coca-Cola business experienced a drop in sales across the immediate consumption restaurant channel, but overall, in North America increased demand of at-home products more than compensated for that volume decline in the immediate consumption channel. CONA Services followed up these strong Bottler results by working to decrease costs. As a result, we were able to achieve a net savings in controllable OPEX of more than $8MM vs budget (minus 10%), and CONA Leadership was prepared to implement further cost reductions if required. At the end of 2020, CONA Services was able to lower the Bottler’s cost per case to below 5 cents, which is the lowest rate ever achieved and more than 60% less in IT costs for the Bottlers compared to pre-CONA times (2013). In addition, CONA Services was able to deliver against our commitment to enhance the CONA platform by completing CONA 2.0 initiatives on time, on budget and with quality. Some examples of this work are the Salesforce Contact Center solution, build and deployment of the new Lydia® Voice Picking system, the build of the Blue Yonder planning platform and the build of the Snowflake analytics platform. All this with a workforce that had to quickly adapt to primarily working from home and learn to operate in new ways. In the end, we developed more efficient and effective ways to deliver capabilities. All in all, the crisis made us stronger as a team. 4
| 2020 ANNUAL REPORT
While our franchisor The Coca-Cola Company (TCCC) and its business unit Coca-Cola North America experienced an unseen magnitude of restructuring and change, CONA Services was the stable backbone to deliver the required IT capability to the customers in North America. CONA Services initiated and led new partnerships and stronger collaboration in building common IT capability for North America across TCCS in several key areas. The people that make CONA Services successful have perseverance and collaboration in their DNA. This, and an unwavering commitment to excellence, allowed us to finish 2020 with one of our strongest performances. We are fortunate to have owners and Bottlers that acknowledge the effort and partnership of the CONA Services team. We received several formal thank you letters and messages of gratitude from Bottler Senior Executives. I will share with you one such letter from Liberty Coca-Cola Beverages who wrote:
“Dear CONA Team, On behalf of the Liberty Executive Team, we would like to take this opportunity to recognize all of your efforts in maintaining our systems during this challenging year. Your dedication and commitment to Liberty and our customers enables a competitive advantage when we have minimal disruption to our systems and ensuring our environment is safe and secure from cyber threats. A huge Liberty Thank You for your great help in managing through this tough year. We wish you and your families a wonderful holiday season. Cheers to you, Fran McGorry, Paul Mulligan, Sheri Preston, Bil Derbyshire, Mike Luber, Maria Galic, Lawrence Dietrich, Kim Delaney, Sam Campanelle, Charlie Fetters, Dennis Veneri, Mayra Linares, Jim Tuttle”
Thank you to my fellow leaders, the CONA Services employees and all our partners for coming together to deliver such strong results in 2020. It is an absolute pleasure to be a part of this company.
R. Meister
Reinhard Meister CEO
2020 ANNUAL REPORT |
5
BOARD OF DIRECTORS
Eric Steadman
CHAIRMAN OF THE BOARD Coca-Cola Bottling Company United
Scott Bedows
VICE-CHAIR OF THE BOARD
Jeff Turney
Coca-Cola Consolidated
Coca-Cola Canada Bottling Limited, Heartland Coca-Cola Bottling Company
Simon Parkinson
Coca-Cola Southwest Beverages
6
| 2020 ANNUAL REPORT
Maria Galic
Liberty Coca-Cola Beverages
Paul Herring
Coca-Cola Beverages Northeast
The CONA Board of Directors oversees the strategic, financial, and operational success of the company. The Board consists of an executive leader from eight of the participating bottlers and an At-Large seat representing the remaining bottlers. These leaders each bring a unique perspective, deep industry knowledge, and diverse business experience.
Michael Kennaugh Reyes Holdings
Leigh Crum
Abarta Coca-Cola Beverages
James Sloan
Terrence Gee
Darin Rice
Barry Simpson
Swire Coca-Cola
Coca-Cola North America
Coca-Cola Bottling Florida
The Coca-Cola Company
2020 ANNUAL REPORT |
7
PEOPLE & CULTURE EMPLOYEE ENGAGEMENT The CONA Services team continued to grow in 2020. Even with the challenges of the global pandemic, we welcomed an additional six new team members while continuing to maintain an above average retention rate. The second annual Employee Engagement Survey was executed showing an improvement in the company’s overall engagement score. Employee feedback from the survey, along with an increased awareness of diversity and inclusion challenges across the country, helped us identify opportunities for the company to continue to improve. One key action from this work was for CONA Services to partner with Fundamental Advisory to work alongside our leaders and employees to develop the right actions and activities to address important topics. One example of this was the implementation of company-wide Diversity, Equity and Inclusion training for all employees. This ongoing partnership and increased focus on education and training helps us to further enhance the already strong culture at CONA. CONA Services continued its commitment to inspiring the next generation of workers by providing a formal Internship program for the 5th consecutive year. Even with the challenges of adapting to work in a changing environment due to the COVID-19 pandemic, CONA hired 5 interns who completed the 9-week program remotely. Despite the unusual structure the program proved to be very successful, and our interns left with a valuable experience. In 2020, CONA Services stepped up to the challenge of an unprecedented and difficult global environment, continued to grow as a team, achieve positive results, and deliver successful business outcomes all while transitioning work routines to a primarily remote work environment.
8
| 2020 ANNUAL REPORT
CULTURE & COMMUNITY SERVICES Part of the CONA Services culture is our team’s commitment to helping the community. The COVID-19 crisis caused many volunteer organizations to postpone events our team has previously supported. However, CONA was fortunate to participate in Atlanta’s Habit for Humanity program and the annual Ronald McDonald House Charities® Golf Classic fundraiser that CONA has helped sponsored for years. Habitat for Humanity The CONA team continued working with Habitat for Humanity in 2020. This is a great organization that helps families achieve the goal of home ownership through their home builds. Ronald McDonald House Golf Tournament CONA participated in Ronald McDonald Tournament again in 2020. The mission of RMHC is to create, find, and support programs that directly improve the health and well-being of children and their families. CONA believes in this mission. Many of CONA’s strategic partners once again supported this fund raiser.
Our People Are Our Most Valuable Asset The collective sum of the individual differences, life experiences, knowledge, inventiveness, innovation, self-expression, unique capabilities and talent that our employees invest in their work represents a significant part of not only our culture, but our reputation and company’s achievement as well. We are smart alone but together we are genius. We embrace and encourage our employees’ differences in age, color, disability, ethnicity, family or marital status, gender identity or expression, language, national origin, physical and mental ability, political affiliation, race, religion, sexual orientation, socio-economic status, veteran status, and other characteristics that make our employees unique. CONA Services LLC is committed to this and works hard for continued growth for the Company as well as its team members.
2020 ANNUAL REPORT |
9
SUCCESSFUL 2020 INITIATIVES Completing CONA 2.0 Initiatives on time, on budget & with quality.
SALESFORCE CONTACT CENTER In 2020 CONA Services, the CONA participating Bottlers and the Coca-Cola System’s shared services organization BSNA implemented and deployed a new Customer Relationship Management (CRM) and Contact Center solution on the new Salesforce platform. This solution, known as the Integrated Customer Engagement Platform (ICEP) began as a project in 2019. In the first half of 2020 the team, using an Agile project management methodology, developed the initial Minimal Viable Product (MVP) and then began deploying the solution. The first ICEP deployment focused on the BSNA Contact Center supporting Heartland Coca-Cola Bottling Company and ABARTA Coca-Cola Beverages. Unlike CONA’s traditional deployment approach, the team had to work through the unprecedented challenges brought by the COVID-19 pandemic. In collaboration with CONA’s system integration partner Capgemini, BSNA and the Bottlers, the team was able to develop an innovative new approach and deploy the solution completely remote. This major endeavor highlighted the ingenuity and remarkable teamwork across the organizations. The ICEP Contact Center is now fully deployed in all CONA Bottlers as well as BSNA. The current solution includes integration with four major telephony systems, supports order taking, is fully integrated with the SAP® backend systems and the myCoke.com customer portal. Additionally, the solution provides the foundation to manage customer interactions like customer equipment tickets and equipment service tickets, features that will soon be fully integrated in the platform. This will allow service technicians to be dynamically scheduled in Salesforce and then supported in the field on a brand-new mobile application that will continue to enhance a 360-degree view of customers. The flexibility and ability of the team to adapt to environmental changes and the complexity of implementing a large-scale technology platform across multiple entities, proved to be critical components of the success of the ICEP Project.
10
| 2020 ANNUAL REPORT
SNOWFLAKE
®
2020 was also a year of significant change within the CONA Services Business Intelligence (BI) space. It marked the start of the journey to transition CONA’s data warehouse from SAP® HANA to Snowflake®. In 2019 the planning and foundational work began with CONA Services and Bottler teams collaborating on making critical decisions in Architecture Design, Code Management, the Security model, and segmentation of the work via subArea groups. In 2020, it was time to execute the plan to develop and enable our destination data warehouse. The team remained flexible and accountable, focused on continuous improvement while also scrutinizing each piece of the process and continuing to learn. As the year progressed, formal routines were established for managing daily work in Octane™, facilitating Bottler workshops, conducting technical reviews, and supporting change management. The first three subAreas were successfully completed on time and in full. Functionality in these subAreas included HR Employee Central (EC), MDM (Master Data Management), Full Service, CAM (Customer Asset Management), G/L (General Ledger), Profitability, AR, Blue Yonder, and Production Execution. The achievements realized in 2020 validated the decision to move to Snowflake®. We look forward to delivering the rest of the new data warehouse and enhanced capabilities in 2021.
LYDIA VOICE PICK ®
In 2019 CONA Services began to evaluate new warehouse voice picking solutions in preparation for manufacturer support of the existing system being discontinued in 2021. This provided an opportunity for CONA to look at other solutions currently available in the market that could bring enhanced functionality and potential cost savings. After eight months of research, the CONA team selected Lydia® Voice from Ehrhardt Partner Group (EPG). After a successful pilot test, the Lydia solution was rolled out to its first site in March 2020. It was followed by a series of successful deployments to 92 other North American locations. As with other projects, COVID-19 travel restrictions and site safety policies prevented the team from conducting on-site deployments. A hybrid implementation plan was developed allowing the CONA and EPG teams to remotely support on-site Bottler IT resources in deploying the solution and meet aggressive delivery requirements. Using this new approach, Bottler IT teams, supported by CONA, were able to handle most of the installation and implementation activities. The new solution has increased efficiency at each of the 92 implementation sites. Early results showed an average of 7% productivity improvement over the previous voice solution. This multiplied by additional users and hours positions the system to realize significant savings in the future.
2020 ANNUAL REPORT |
11
UPDATE FROM OUR CFO
CONA Services LLC is now in its sixth year of providing best in class IT products and
services for our CONA North American Bottlers. From a financial perspective, we have continued to grow and mature as an IT services organization, with our key financial metrics of controllable operating expenses and cost per case for the Bottlers coming in favorable to our business plan targets. We also continued to improve and advance our balance sheet and cash flow positions during the year which adds depth and strength to our overall net financial position. Given our overall financial strategy of achieving a breakeven position for our financial results, our overall net loss came in at ($1.7mm) for the year including all audit adjustments and end of year price rebates to the Bottlers. 1.
CONA Financial Results Favorable to Plan
CONA Services LLC continued its positive cost per case downward trend in 2020 – achieving an actual cost per case rate slightly below $.050 cents per case for the full year. This was achieved due to two key factors including successful CONA operating expense cost management and consistent Bottler volumes, despite COVID concerns. Since our inception, we have continued to prove out that we can deliver world class IT solutions while driving down our cost per case for our CONA Bottlers. We will continue to optimize and drive out costs in our operating expenses, although we expect the cost per case to stabilize in 2021 given increased investments in Blue Yonder, Salesforce and Snowflake platforms as well rising slightly going forward in future years as we invest in our future solutions. 2. Controllable Operating Expense Savings Once COVID hit in the March/April timeframe, CONA initiated an operating expense reduction plan to help mitigate potential financial risks for the Bottlers. During 2020, we were able to realize ~$8mm in controllable operating expense savings for the year. We achieved this by closely monitoring headcount for both contractors and new hires, administrative expense reductions, negotiating price reductions with key vendors, as well as savings on planned spending from our BI and Infrastructure areas. 12
| 2020 ANNUAL REPORT
3. Implementation of CONA 2.0 Vendor Contracts During 2020, CONA continued to implement a new round of investment activities targeting our CONA 2.0 roadmap plan including major investments in our Salesforce customer, BI Snowflake® and Blue Yonder planning platforms. To support that activity, the CONA Finance team played a key role in supporting and executing on the new legal contracts in place related to these new major platform changes. Our overall procurement activity increased dramatically in 2020. The overall number of vendors increased by 14% versus 2019 and the total number of Bottler or vendor contracts that we helped to execute on increased 26% in 2020. 4. Improved Cash Flow and Balance Sheet stability We continued to strengthen our tax, treasury, and balance sheet activities in 2020. Some key highlights included renewal of our $3mm line of credit with our banking partner Wells Fargo, and continued improvements to our regular two-month cash forecast plan to help manage our cash activities. On the balance sheet front, we continued to pay down our Note Payable to The Coca-Cola Company and maintained a strong cash on hand position by December 31. Finally, we continued to make good progress on the tax front including hosting several CONA tax committee calls to review and align on overall CONA tax strategies with the Bottlers. We focused our tax work on the Federal and State Research and Development tax credit front and we were able to save the Bottlers $1.2mm for 2020. We continue to maintain emphasis on the taxability of sales and use taxes in our various Bottler states related to IT services to ensure we have proper coverage across CONA and our Bottlers.
Scott Armstrong Scott Armstrong CFO 2020 ANNUAL REPORT |
13
CONA Services, LLC 10 10th Street NE, Suite 1100 Atlanta, GA 30309 14
| 2020 ANNUAL REPORT