Grade: C — Some Red Flags, Investigate
Framework: Schilit *Financial Shenanigans* + Beneish M-Score + forensic accounting principles
Data: SEC EDGAR 20-F (filed Mar 13, 2026) + Yahoo Finance
Auditor: Ernst & Young LLP — Clean opinion (unqualified)
One-line verdict: CCEP should not be flagged for elimination on earnings quality grounds. The two automated fails — goodwill at 217% of equity and cash covering only 9% of debt — are real structural concerns from the acquisition-heavy bottler model, not signs of manipulation. M-Score is clean at -2.60, CFFO/NI of 1.52 confirms cash conversion, and FCF of EUR 2.0 billion is healthy. The real risk is the enormous intangible asset base from the Philippine acquisition and historical mergers, plus the Indonesia impairment that signals emerging market execution challenges. We adjust the automated F to a C: the balance sheet carries acquisition baggage that requires monitoring, but the underlying business generates strong cash.
| Metric | Result |
|---|---|
| Red Flags | **2** |
| Watch Items | **1** |
| Checks Completed | **17/18** |
| Beneish M-Score | **-2.60** (clean) |
| Altman Z-Score | **1.65** (grey zone) |
| Piotroski F-Score Prob | **0.47%** (low) |
| Auditor | Ernst & Young LLP — Unqualified opinion |
The Business: World's Largest Coca-Cola Bottler
Coca-Cola Europacific Partners is the world's largest Coca-Cola bottler by revenue, bottling and distributing Coca-Cola products across Western Europe, Australia, the Pacific, and Southeast Asia. The company was formed through a series of mergers — Coca-Cola Enterprises, Coca-Cola Iberian Partners, and Coca-Cola Erfrischungsgetraenke merged in 2016, then acquired Coca-Cola Amatil (Australia/Pacific) in 2021 and Coca-Cola Beverages Philippines (CCBPI) in 2024.
This acquisition history is the reason for the balance sheet's heavy intangible load. Every bottler merger creates goodwill and brand intangibles. Understanding this is essential to reading CCEP's financials.
Profitability: Stable Consumer Defensive
| Metric | FY2022 | FY2023 | FY2024 | FY2025 | Trend |
|---|---|---|---|---|---|
| Revenue | EUR 17.3B | EUR 18.3B | EUR 20.4B | EUR 20.9B | +2.3% YoY |
| Net Income | EUR 1.5B | EUR 1.7B | EUR 1.4B | EUR 1.9B | +36.9% YoY |
| Gross Margin | 35.9% | 36.7% | 35.3% | 35.6% | Stable |
| Net Margin | 8.7% | 9.1% | 6.9% | 9.3% | Recovery |
| Comparable ROIC | — | — | 11.1% | 11.5% | Improving |
The 20-F reports: "Reported revenue totalled EUR 20.9 billion, up 2.3% on a reported basis and 2.8% on an adjusted comparable and FX neutral basis." Volume was up 2.4% on a reported basis, with adjusted comparable volume up just 0.2% — indicating the revenue growth came primarily from pricing and the Philippines acquisition, not organic volume.
FY2024 net income was depressed by EUR 135 million in Indonesia impairment charges and EUR 254 million in restructuring costs. FY2025 saw those charges moderate, driving the net income recovery. Comparable operating profit grew 7.1% on an adjusted comparable and FX neutral basis.
Revenue per unit case increased 2.9% on an adjusted comparable and FX neutral basis, "driven by favourable mix, positive headline price increases and promotional optimisation." This demonstrates pricing power through the Coca-Cola brand franchise.
Cash Flow: Solid Consumer Staples Cash Generation
| Metric | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|
| Operating Cash Flow | EUR 2.9B | EUR 2.8B | EUR 3.1B | EUR 3.0B |
| Net Income | EUR 1.5B | EUR 1.7B | EUR 1.4B | EUR 1.9B |
| **CFFO / Net Income** | **1.94** | **1.68** | **2.16** | **1.52** |
| Free Cash Flow | EUR 2.3B | EUR 2.0B | EUR 2.1B | EUR 2.0B |
CFFO/NI of 1.52 is healthy — profits are backed by cash. The ratio has been consistently above 1.5 for four years, indicating no persistent gap between reported earnings and cash generation.
FCF of EUR 2.0 billion supports the company's shareholder return program. The 20-F notes "strong comparable free cash flow generation" that "enabled us to continue to return cash to shareholders, as demonstrated by the share buyback and dividend paid in the year."
Balance Sheet: Acquisition Baggage
| Item | FY2025 | Notes |
|---|---|---|
| Cash | **EUR 1.0B** | Down from EUR 1.7B in FY2024 |
| Total Debt | **EUR 10.7B** | Slightly down from EUR 11.3B |
| Cash minus Debt | **-EUR 9.7B** | Net debt position |
| Goodwill | EUR 4.5B | From bottler mergers |
| Intangibles | EUR 12.5B | Primarily bottling agreements and brands |
| **Goodwill + Intangibles / Equity** | **217%** | Fails threshold — but structural for bottlers |
| Debt/EBITDA | **2.8x** | Healthy |
| Interest Coverage | **10.2x** | Strong |
The goodwill and intangibles fail is the most significant item. EUR 12.5 billion in intangibles represents primarily indefinite-lived bottling agreements with The Coca-Cola Company and brand rights acquired through mergers. These are contractually protected franchise agreements — as long as the Coca-Cola system remains intact, these assets have real economic value.
However, the Indonesia impairment in FY2024 (EUR 135 million recognized for the Indonesia cash generating unit and the Feral brand) demonstrates that not all acquired assets retain value. Indonesia volume declined 18.6% in FY2025, "reflecting a weaker macroeconomic environment and lower consumer spending."
Debt/EBITDA of 2.8x and interest coverage of 10.2x are healthy and signal no financial distress. The company actively manages leverage.
The 18-Point Screening
Revenue Quality
| # | Check | Result | Detail |
|---|---|---|---|
| A1 | DSO | ✅ | 47 days, +1 day YoY. Stable |
| A2 | AR vs Revenue | ✅ | AR growth 4.7% vs revenue growth 2.3%. Modest differential |
| A3 | Revenue vs CFFO | ✅ | Revenue +2.3%, CFFO -3.5%. Both low-growth, in sync |
Revenue quality is clean. The 20-F confirms revenue recognition relies on standard product delivery, with the key judgmental area being accrued customer marketing costs (off-invoice discounts of EUR 6.0 billion, with EUR 1.4 billion accrued). EY flagged this as a Critical Audit Matter, but found the estimates reasonable.
Expense Quality
| # | Check | Result | Detail |
|---|---|---|---|
| B1 | Inventory | ✅ | Inventory -3.8% vs COGS +1.8%. Inventory declining. Clean |
| B2 | CapEx | ✅ | CapEx +1.2% vs revenue +2.3%. Normal |
| B3 | SG&A | ✅ | SG&A/Gross Profit = 31.6%. Normal |
| B4 | Gross Margin | ✅ | 35.6%, +0.3pp YoY. Stable |
No concerns. Gross margin stability at 35-37% over four years is consistent with a beverage bottler operating under franchise agreements with concentrate pricing tied to TCCC.
Cash Flow Quality
| # | Check | Result | Detail |
|---|---|---|---|
| C1 | CFFO vs NI | ✅ | Ratio 1.52. Solid cash conversion |
| C2 | FCF | ✅ | EUR 2.0B, FCF/NI = 1.03 |
| C3 | Accruals | ✅ | -3.4%. Negative accruals — earnings conservative relative to cash |
| C4 | Cash vs Debt | ❌ | Cash EUR 1.0B covers only 9% of debt EUR 10.7B |
C4 fails because the cash balance is only EUR 1.0 billion against EUR 10.7 billion in debt. However, with FCF of EUR 2.0 billion annually and debt/EBITDA of only 2.8x, debt service is not at risk. The low cash balance reflects active capital allocation (buybacks, dividends, acquisitions) rather than liquidity stress.
Balance Sheet
| # | Check | Result | Detail |
|---|---|---|---|
| D1 | Goodwill | ❌ | Goodwill + Intangibles EUR 17.0B = 217% of equity |
| D2 | Leverage | ✅ | Debt/EBITDA 2.8x. Healthy |
| D3 | Soft Assets | ⚠️ | Other assets grew 34.7% vs revenue 2.3% |
| D4 | Impairment | — | No data in automated check (but Indonesia impairment disclosed in 20-F) |
D1 is the most significant fail. The EUR 17.0 billion in goodwill and intangibles represents 217% of equity. This is structural for a bottler that grew through mergers, but it means any impairment could wipe out a substantial portion of equity. The Indonesia impairment in FY2024 is a warning shot.
Acquisition Risk
| # | Check | Result | Detail |
|---|---|---|---|
| E1 | Serial Acquirer | ✅ | FCF after acquisitions positive |
| E2 | Goodwill Surge | ✅ | Goodwill + Intangibles -2% YoY. Stable (no new major acquisitions) |
M-Score
| # | Check | Result | Detail |
|---|---|---|---|
| F1 | M-Score | ✅ | -2.60, below -2.22 threshold. Clean |
All eight M-Score components are within normal bounds. DSRI of 1.024 and SGAI of 0.977 confirm no manipulation signals.
Key Risks from the 20-F
1. Indonesia Market Deterioration
Indonesia volume declined 18.6% on a reported basis in FY2025, with revenue down 12.7% on an adjusted comparable FX neutral basis. The 20-F attributes this to "a weaker consumer backdrop" and notes the FY2024 impairment of the Indonesia cash generating unit. Frestea RTD Tea declined sharply. CCEP shifted to a "new distributor partnership model" in Indonesia, suggesting the original approach was not working.
2. Sugar Tax Escalation in Europe
The 20-F repeatedly references the impact of sugar tax increases in France and Great Britain on volumes. Coca-Cola Original Taste volume was "negatively impacted by the sugar tax increase in France." This is a structural headwind that compresses volume in CCEP's largest segment (Europe = 74% of revenue).
3. Concentrate Cost Dependency on TCCC
CCEP's cost of sales per unit case increased 2.7%, "driven by increased concentrate costs, driven by higher revenue per unit case reflecting the headline price increases." This pass-through mechanism means TCCC captures a share of every price increase CCEP implements. The franchise relationship is permanent and non-negotiable — CCEP cannot source concentrate elsewhere.
4. Geopolitical and Cyber Risk Escalation
The 20-F elevated geopolitical risk to "Increased" trend in 2025, citing "a growing likelihood of cascading or mutually reinforcing events." Cyber and IT/OT resilience risk also increased "as cyber attacks became more sophisticated, further exacerbated by the use of AI."
5. Uncertain Tax Positions
EY flagged uncertain tax positions as a Critical Audit Matter. The 20-F discloses EUR 329 million in current tax provisions for uncertain positions. "The Group's operational structure combined with its multinational presence requires the Group to exercise judgement in determining the amount of tax that could be payable." Transfer pricing across jurisdictions is the primary risk area.
Summary
Grade: C. Investigate the balance sheet but the operating business is sound.
CCEP's financial statements show a healthy operating business: stable gross margins, strong cash conversion (CFFO/NI consistently above 1.5), EUR 2.0B annual FCF, clean M-Score at -2.60, and no revenue quality red flags.
The balance sheet is the concern — EUR 17.0 billion in goodwill and intangibles at 217% of equity, driven by a decade of bottler mergers. These intangibles are underpinned by contractual franchise agreements with TCCC, giving them real economic backing, but the Indonesia impairment demonstrates they are not immune to writedown. Cash coverage of debt at 9% looks alarming but is offset by debt/EBITDA of 2.8x and interest coverage of 10.2x.
For a consumer defensive bottler, this is a C: real structural concerns on the balance sheet that bear monitoring, but the underlying cash-generating business is not at risk of elimination.
**Disclaimer**: This report is based on CCEP's FY2025 20-F (SEC EDGAR, filed Mar 13, 2026) and public financial data. This is NOT investment advice.
Data: SEC EDGAR 20-F + Yahoo Finance
Auditor: Ernst & Young LLP (Unqualified opinion)