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Ladies and gentlemen, thank you for standing by and welcome to the Q1 Report 2020 Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today. And I would now like to hand over the conference to your speaker, Hans Savonije. Please go ahead.
Thank you, Sara. Good morning, and welcome to Royal Unibrew's conference call on the results for the first quarter 2020. I'm Hans Savonije, the CEO of Royal Unibrew; and on the call with me is Lars Vestergaard, our CFO; and Lars Jensen, our COO. Today, we will conclude on the first 3 months of 2020 and share some insights into the coming quarter. We normally don't have a conference call after Q1 as we have a tradition of presenting our Q1 results at the Annual General Meeting, but nothing is normal after the COVID-19 outbreak, and we advanced the date for the AGM, which took place 2 weeks ago. And for the first time, the meeting was without any shareholders attending physically. Before we get to the business results, let me inform you that all of our sites are in operation. Our logistics and customer operations deliver meticulously. And that we have had very few employees affected by the corona disease. Most of our white-collar employees are working from home, and it's important for me to say that we in Royal Unibrew are continuously following the evolvement of the COVID-19 pandemic. We care for our employees and our family -- and their families, and we have taken necessary precautions at a very early stage to reduce the risk of spreading the COVID-19 virus. Now please turn to Slide #2. Royal Unibrew delivered financial results for the first quarter in 2020 in line with the results of last year despite the negative impact from COVID-19. The year started strongly and ahead of last year in both January and February. The initial momentum was positively impacted by great innovation initiatives across our markets. By mid-March, our businesses in Italy and Denmark were impacted by COVID-19 related regulations leading to a performance below last year in March. As in particular, closed bars, restaurants and nightclubs impacted our On-Trade business. As a consequence, we now see changes in consumer behavior as many social drinking occasions have disappeared, resulting in a negative impact for, in particular, alcoholic beverages, whereas nonalcohol consumption is less impacted. During the beginning of March, the sale in supermarkets was very strong but lost some speed towards the end of the month, being in line with last year. We will later in the presentation share the initiatives we have taken to reduce costs and secure financial flexibility. First, we will give you a short update on our 3 business segments. Please turn to Slide #3. Starting with the Baltic Sea segment, Finland and the Baltic countries were hit relatively late in the quarter by COVID-19 as the On-Trade business stayed open for a longer period than, for example, in Italy and Denmark. Total volume increased by 1% and net revenue increased by 3% compared to last year. We saw a positive volume development in all countries with a good price/mix development and support from new innovations, such as Jaffa Juicy in Finland. Please turn to Slide #4. The Western European segment was heavily impacted by COVID-19 with the lockdown of Northern Italy in the beginning of March, followed by the south of Italy and Denmark shortly thereafter. In France and Germany, our business has a more outspoken Off-Trade character and hence, was less affected by the initial government measures, while the border trade in Germany closed almost totally down mid-March. Compared to the first quarter of 2019, total volume development declined by 6% in Western Europe, whereas the net revenue declined by 7% and EBIT declined by 39%. The On-Trade business has declined 90%, 95% after the close down of the 2 countries, and the German border trade is almost closed due to travel restrictions at this moment. We have also seen a change in product mix in the 2 countries, moving towards bigger packaging formats and nonalcoholic products. The drop in EBIT is a combination of lower revenue, provisions for potential bad debt and lower operational leverage as short-term adjustments had limited immediate effects. Now Lars Jensen will take us through the International segment and give the status on the On-Trade business and supply chain.
Thank you, Hans Savonije. Please move to Slide #5. The Q1 result in the International segment was positively impacted by a strong push to ensure sufficient products availability in case that the supply chain would be disrupted or will be disrupted by the COVID-19 virus and thereby leading to a shortage of containers or risk of import bans or other forms of restrictions. The total volume increased by 21% and net revenue increased by 21 -- 28% compared to last year. We estimate that the distributor sales up to consumers and customers increased by approximately 10% and consequently, we are expecting some destocking to happen later during the year. The segment was positively affected by volume increases in Africa and price/mix and exchange rate from the pound in the U.K. The integration of the Bruce Ashley Group in Canada is progressing as planned. Now please turn to Slide #6. With this slide, we want to illustrate the difference in the On-Trade business in the markets where we operate. And generally, Royal Unibrew share of On-Trade is higher than reflected in the chart, which is equal to the market. As you can see from the graph, the On-Trade business varies from 5% to 7% share in the Baltic countries to about 40% in Italy. In each individual markets, our On-Trade share is higher than the general market. And one of the reasons is that there's no or very limited presence of private label and discount brands in that channel. The timing of the imposed restrictions as well as the level of restrictions has been different in our core markets, as mentioned earlier. And what is absolutely most important for our business and our ability to project the financial consequences in the length of -- is the length of the close down and to what extent and in which form the reopening will happen. We stay ready to help our customers at any time. Now please turn to Slide #7. As Hans mentioned earlier, we are in operations at all our facilities and have so far had no stoppages caused by the COVID-19. In a European context, we separated our admin employees from the supply chain and secured home working for as many white collars as possible at a very early stage. Our employees have delivered a great job and have put safety even higher than we would have ever imagined. And all in all, this actually led to an all-time low level of sickness leaves for other reasons when comparing to the season. Our biggest challenge as we speak are adjusting to the lower volumes and through the amount of adjustments that we see to our forecast because of the lower transparency. Short term, we have lost some operational leverage, but we try as much as possible to adjust and secure reliable thinking on the cost side. Logistics is in general working as planned, and we have had only very few real issues that we have seen so far. With this, I will now hand over to Lars Vestergaard to go through the sourcing and financial numbers.
Thanks, Lars. On sourcing, our team has done a great job in collaboration with our suppliers and thereby secured delivery on time from all suppliers and therefore, there's not a lot to report from the supply side. Please turn to Page 8. If you look at what has happened to our business, the COVID-19 has had a significant impact on parts of our business. And we believe that some effects will continue to affect consumer behavior for the coming years. In general, the business model we are working on, that we have is working. And at this point, we see no need to make major adjustments. Therefore, our focus has been to manage cost and cash in the short term and to ensure that we have the right team and financial flexibility in place once we are on the other side of the virus outbreak. We've had many questions around the cost structure and how much we can adapt to the change in volume and mix. And now we'll give a bit of insight into this. If we start with production cost, the majority of our cost is raw and -- raw material and consumables, which, in principle, is fully variable. The salary part is more mixed. Normally, we employ a number of seasonal workers over the summer. This part provides some variable costs where we don't need to recruit all these temporary employees. On top of this, we are using the government schemes in example Denmark, where -- which enables us to reduce the salary cost whilst volumes are down. Depreciation charges, of course, fixed in the medium term, but we are managing and postponing some CapEx investments to reflect cash short term and -- as we don't want to -- as we want to limit the number of external people that have access to our facilities. If we look at our sales cost, as a principle, these are unrelated to volumes, but includes a significant element of discretionary spend. It takes a bit of time to manage down the cost. So the effects will now start to show from quarter 2. We will continue to serve our customers and ensure that we come out on the other side with good relations to customers. In the On-Trade, a substantial part of the sale force has been sent home as there are few customers to visit. We're managing costs by using government schemes, vacation, et cetera. On marketing costs, we are trying to manage -- minimize or optimize as much as we can. Again, this will start to have an effect in quarter 2 as we need to finalize the committed initiatives that we planned earlier on in the year. When it comes to sponsorships, our cost is more fixed in nature. And as such, it is more difficult to bring these down in the short term. Distribution costs is, to a very high degree, volume-related and will, to some degree, move down in line with volume, in particular where we have outsourced distribution. Where we have our own setup, we're also sending home colleagues on government schemes, but some costs related to trucks and warehouses are fixed. Our largest in-house On-Trade distribution setup is in Denmark, whereas it's outsourced in Finland and in Italy, we distribute by our wholesalers. The last part, the admin cost is not very volume dependent, but there is, of course, an element of discretionary spend where we can delay project work and try to manage down our cost this way. If we turn to page -- Slide 9. As Hans mentioned in the beginning, we delivered our quarter 1 in line with last year. On the group level, volumes ended at the same level as last year at 2.2 million hectoliters. Our revenue amounted to DKK 1,524 million compared to DKK 1,521 million last year. The impact from acquisitions have been very limited in the first quarter. EBIT decreased by DKK 11 million to DKK 200 million. The quarter is negatively impacted by bad debt costs related to the COVID-19 outbreak. As announced in March, it was decided to suspend the DKK 400 million share buyback program in total. Before we suspended it, we bought 112,000 shares at a market value of DKK 45 million. At the AGM, it was decided to suspend the dividend payment related to the result of 2019. The suspension of the total shareholder distribution ensures Royal Unibrew flexibility through these difficult times. The AGM approved a potential extraordinary dividend payment at a later stage subject to adequate financial flexibility and Board approval. Please turn to Page 9 -- turn to Page 10. We entered 2020 quite strong, both the business was doing well and our financial balance sheet was healthy. At the end of the first quarter, we had DKK 2.2 billion in undrawn committed facilities with the main facility maturing in 2023. With the current leverage of 1.6x EBITDA, we have substantial headroom to meet financial covenants in our financial agreements. The main part of our earnings comes from euros or Danish kroner, and of course, the impact from these currencies is expected to be limited. We have some sales in America and -- in U.S. dollars. And we do some procurement in U.S. dollars, and these are more or less equal. So very little impact from currency -- transaction risks related to currencies. The risk of losses from customers has increased, and we expect to see losses in the On-Trade channel in the coming quarters. Part of these losses is expected to be recovered through our credit insurance policies. Our recently acquired businesses are performing well. So the risk of impairment is, at this point in time, not something we see. With this financial update, I'll give the word back to you, Hans.
Thank you, Lars. Please turn to Slide #11. Before we are ready for your questions, I would like to wrap up our session and share our key priorities in the current situation. Foremost, and most important, we secured the safety around our employees and our sites. Second priority, but perhaps not in order, business continuity, securing maximum flexibility of our organization and our production. And thirdly, we use the agile organization that we have to provide consumers and customers with the right products that may have changed a little bit from 2, 3 months ago. Then we stay close to the market and follow the opportunities that may occur. And lastly, we continue to care for the communities in which we operate. Amongst others, through disinfectant production and close cooperation with multiple authorities on the COVID-19 containment. With this, we have now completed our presentation for today. And we are ready to take your questions.
[Operator Instructions] Our first question comes from the line of Frans Hoyer from Handelsbanken.
My question is around the mitigation efforts that you described on one of the slides, the various types of savings and flexibilities you're working on. Could you talk about the scale of benefits and the timing of benefits that you -- that we might see from this work? And I guess, I mean, the issue -- the sense I get is that Q2 will be more difficult on the top line. And so the question is how much of the benefits might we see already in the second quarter?
Yes. So I think the way that you should look at this is that we -- as Lars said, we have taken the view of maximizing our flexibility given the level of transparency. And that means whatever is directly I would say linked to volume. We consider as much as we can and acknowledging that there's part of it that is not fully variable, but we -- mentally, we consider it as being 100% variable. So that's the mindset that we have. And on -- and on what you call -- what we call discretionary spend, we either have -- either freezed, postponed or canceled as much as we can, again for the same reason, as I mentioned before. If you look at our phasing in terms of spend throughout the year, it is not like that we will be able to compensate on the cost side for the loss that we have, when you look at the individual quarters, that is totally impossible. So there will be some phasings between the quarters in terms of the cost. And as Lars also said, some of them are -- takes a bit of time to massage and maneuver. In certain areas, we have commitments that we need to stick to or where it is the same cost to get out of that commitment as it is to basically -- to get the benefit of what we buy. So I think what you need to read in this is that we try to get as much flexibility as we can so that we can take the right decisions for the business. When -- now if we see a scenario where things will change, On-Trade will start to open up, we will, of course, start to roll back some of the spendings that we have frozen. And that is -- and that makes it difficult for us to give you an exact amount because what we would like to do in reality is to unfreeze as much as possible. Because that is what is good for the business in the long run. So it really depends on what kind of a scenario that we see from the governments on this. I hope that gave you a little bit more flavor on this front.
Our following question comes from the line of Marcus Bellander from Nordea.
A couple of questions. First of all, if you could perhaps share something on current trading. You said that March was down 9%. I'm just wondering if April, is it the same? Is it a little worse? Is it considerably worse? Anything you could add there would be appreciated. Secondly, on the bad debt provisions. I think Hans said that these were for potential losses. I just want to get a better understanding for how much this covers? Is it all the losses you expect for the rest of the year? Or is it for the next quarter? Or what's in there? Those would be my 2 questions.
Lars takes the last one on the bad debt.
Yes. So if we start with the bad debt, the bad debt provision we took was based on the balance sheet as we saw at the end of the first quarter. And so basically, we made provisions where we could see that some customers had fallen behind on the payment of debtors -- of the receivables. So it's not an assessment of what will happen in the full year as things are moving quite a lot, and there are some customers where we struggle to get in contact with them at this point in time. So the numbers we have here is on the -- at the end of the first quarter, and we have not seen a deterioration since then. So you could say it's a fairly accurate hint of where we stand right now. But of course, a lot happens in the coming months in the On-Trade. So this is an area where there is some risk.
And we have seen no material change since the closing of Q1 and until now on that note. Hans, will you take the question on the current trading?
I will. Marcus, the current trading, of course, we have internally made a number of scenarios, yes. But what we currently see is that our Off-Trade operations trade according to plan, even slightly better. And of course, the On-Trade income and revenue generation is at a very, very low pace, very low level at this moment. So -- but we do not see a consistent decline, which may be the fear that some people may have had. Yes. So we operate. The focus is very, very much on the supermarkets, what we call the Off-Trade segment. And within that segment, we continue to do good work.
Our following question comes from the line of Tristan van Strien from Redburn Partners.
I hope everybody is keeping safe there. Just 3 questions for me, please. One, you mentioned that you expect some more permanent consumer behavioral changes going forward as you look to evolve your business model post this. So just a little bit more insight into that would be great. The second one, in terms of the promotional pressure that we normally see in the off-premise with your clients, how is that evolving? Have you -- I assume you've pulled back on promotions, how is that evolving as we go forward over the next few quarters? Are the normal promotional programs coming back? And then your third question, I think a little bit of a follow-up on the bad debt as well. Because how should we think about your working capital? Because it actually looks like it improved in Q1, it's a small quarter. But what are some of the components in terms of the working capital and the impact on your cash flow for the rest of the year on that one?
Yes. If I start with the first question on the consumer behavioral changes, I think the way that we see it is that we will probably find a new normal when we are on the other side. And we don't have answers to all of them. But if we look back on some of the crisis that we have seen throughout the last 20 years, they have always left some opportunities because people for what -- for different reasons, move to different buying behaviors. I think one of the things that we have seen here is that the digital channel as an example, Click & Collect, has gotten very, very high-growth rates. We don't think that we will -- that we will see numbers that will get back to where we came from. We think that a lot of people have learned to do e-commerce shopping and that, that would stick. So what does that mean to us in the way that we operate and the competencies that we need to have in-house to service just as an example. So we are highly alert on these changes. And given that we have a very, very wide assortment in our multibeverage markets, we feel that we are well positioned to capture on this opportunity when we are more freely staying together. So giving you detailed concrete things at this moment of time is a bit premature, but we have the alertness and expect that things will change. On the promo pressure, I think one thing that you need to keep in mind here is that the planning of promotions is normally done weeks and months in advance. And most retailers run with schedules that are 6, 12, 16 months down the road to secure that they have deliveries, they've done their forecasting, they have made their planning in the store, et cetera, et cetera. So in the short term, what we have experienced is that the stores have put a focus on multipacks. So they are moving more towards bigger packs and the consumers are moving more towards bigger packs. But that is in line with what they normally do on the promo side where they want people to buy more to get a better price. So in the short term, we haven't seen any major changes. I think one of the things that we are discussing quite a bit is what will happen, everybody sits on stock that basically have been focused around the convenience channel and the On-Trade channel. And what will happen if the markets are not opening accordingly, would that lead to an over-flood of short-dated products in the stores and thereby, kind of like disrupt the whole price view in the stores. We don't hope that, that will be the case. We hope that the On-Trade will open up, and we can start shipping the On-Trade products to the On-Trade. But there's a lot of things at play at this moment of time. Some, we can play to an advantage. Others will be the opposite. So a lot of things at play. Lars, will you give a comment on the bad debt conversion as well?
Yes. Where we see the biggest change in this area is, of course, that the On-Trade has a different level than what we have had in previous years. If we take the aging of the debtors, we have not seen a dramatic deterioration in the overall portfolio of receivables. So, so far, it's not a big risk we sit with in accounts receivables. So the level is lower due to the fact that the On-Trade business is lower. And that is what will continue throughout the year until the On-Trade starts to move up again. In inventory, we've had a clear focus on making certain that our service level to customer was good. And here, we are, in particular, looking at what SKUs are moving fast. So we are, of course, continuing to produce, in particular bigger pack, which have had a good uptick in these periods. On the other hand, we have some inventory that, of course, moves slower than planned because some channels on some occasions slows down quite dramatically. So expect to see higher inventory than we've had in previous years as things are slightly more, what you can say, unpredictable at this moment. And payables will, of course, come down in line with the lower business we have in On-Trade. And also as is reflected, we do not have a lot of CapEx expenditures this year. So that will, what you can say, have an impact on working capital as we don't have these payables sitting in our balance sheet.
Hans, is there anything you want to add on the consumer behaviors or promo pressure?
No. Tristan, this is -- it's a very good question. It goes in my mind, even further back than 20 years because I happened to be leading the Coca-Cola operations in Russia during the ruble crisis, and a lot that is happening today we went through in those days as well. I think Lars is correct, it's difficult to indicate right now what the exact changes are. The experience has always demonstrated that doing research with consumers at a time that they are distressed gives you the wrong answers, so we can only operate from our experience. And the good thing is we've got quite a lot of that in the company.
We have no further questions. [Operator Instructions] We have one question from the line of Marcus Bellander from Nordea.
Just another one for me. We're reading about how craft breweries are struggling in this rather tough market. Do you expect there to be less competition after the COVID-19 crisis? And also, do you think the M&A landscape is currently changing for the better?
I think, of course, companies that do not have a strong equity base will -- and have exposure to On-Trade, they will be in a tough situation if the market and the wet-led part of the market does not open. So yes, I would foresee that probably not only craft, but in general, that you would see bankrupt -- bankruptcies in most of our key markets, I would say, undoubtedly. I think competition is already tough. So even though that there is x percent of craft brewers that will go down -- go in bankruptcy, I think competition will remain tough as it is today. Your other question on the M&A side. I think if you have companies that are in the situation, as we just -- as I just talked about, so being heavily under pressure, I think, yes, then they will try to see if they can sell the company and get a little bit out of it, and that would lead to some potential probably smaller M&A transactions. I think the stronger companies, I don't think there is, in principle, the family-owned, I think that's -- they will stay within the families, if they are well-founded and they will get through this and get on the other side. So I don't think that I would expect anything to change there during the crisis. It might be that after the crisis, there will be some reflections. I think where we would -- where we are keen to understand, and that is, of course, what this would lead to from some of the bigger players in the market, in the beverage markets. How do they think? Do they have some smaller markets that they want to divest, do they have brand propositions and so on and so forth, given that leverage is changing for some of them or strategic focusing is changing? And again, that I don't think that during the next month, that is something that will be available in the market, but it will probably be something that most companies go through over the next, let's say, half a year. So as we normally do, we keep ourself alert. We want to be -- we want to know if something is going on, and we have been good in that so far, and we'll continue to do so. And no change to our view on that, we feel that M&A at the right price with the fit of strategy and with a prepared organization will be something good for Royal Unibrew.
Our following question comes from the line of Simon Rowe from Janus Henderson.
I just wondered about whether you could say something about your soft drink business. I saw the split of the On-Trade, Off-Trades, but I take it that's for the whole business. But I just wonder whether there's anything specific you could say about the sensitivities of your nonalcoholic business for the current situation.
Hans, do you want to answer that question?
Simon, the soft drink business that we have is a very multibeverage character because almost, we are active in all segments from water to energy drinks, to soft drinks, to juices. And whereas we see that some of these sectors are decreasing, others are increasing. It is quite clear that when you think of soft drinks in On-Trade, quite a lot of the soft drinks in On-Trade are going through what we call fast food kind of channels. In general, the margins there are not fantastic, yes. So the soft drinks that we miss in the On-Trade make -- relatively seen on the margin side, less of an impact on the volume side. So we have a robust portfolio, I would say. We've got quite a lot of functional products in there that see some uplift at this moment. So I think we are well positioned to come through this.
I was -- the reason why I asked the question is I saw the remarks of Coke, who were talking about like a 25% reduction, I think, and obviously, that reflects a lot of exposure to convenience. But what do you see?
Yes. I mean, are you referring to...
Simon, that's going to be -- sorry, Hans. Come.
Yes. I just wanted to ask Simon to clarify which Coca-Cola you are referring to because there are so many reports of bottlers and the company. But if you look at Europe, of course, Coca-Cola bottlers of Europe is very hard hit by the situation in Spain. Yes, there's a very big On-Trade business and otherwise, I would say we normally refrain very much from commenting on competitors' behavior and how they are built [indiscernible] but our portfolio is, like I said, there's a multiple of different segments in which we compete, yes, and that provides quite some stability.
If I may add to that. I think what we have seen here is that people still want to indulge themselves. And while you're not together with friends and family and socializing, you tend to drink more without alcohol. So that is one of the changes that we have seen during the recent weeks, which, of course, with our portfolio is great. If you only have a portfolio with alcoholic products, I think you would be suffering more. So it's really good for us that we have this wide portfolio. Also in terms of the channels because there's also differences in terms of the channels. So how much business is in the Alko segment versus the non-Alko in the different channels. So in that respect, we have a pretty broad and well-positioned portfolio.
Okay. Could you just say something about the management situation?
So we got Lars on board, if I may start, a month ago. And given that Lars cannot physically meet with a lot of colleagues, Lars and I have been able to do a good and proper and fast handover. And I am getting into the new role as a COO, I think my fortune is that I know the people in the organization. So it's a bit easier for me, of course, to get immediately in contact. And then the CEO process is ongoing. So as you know, it was initiated after the announcement. So giving a status at this moment of time is a bit early, but the process is ongoing.
Okay. Look last year...
And I'm still going strong.
Yes. But are you in Switzerland, Hans?
Excuse me?
Are you -- you're based in Switzerland, is that right?
I'm based in Switzerland, that's correct. Yes, at this moment.
Just one last thing. I mean, presumably, the -- I mean, last year, there was obviously a lot of discussion about the acquisitions. But presumably, development of those very much depends on putting feet on the ground and being able to push the product to bars that are all closed. So I suspect that it's very tough to make progress there. But is there anything you can say?
Lars?
Hans? Sorry. Simon, would you -- could you repeat the question? [ Well, there was a line that was a little bit faster. ]
Obviously, one of the features of your time as CEO is that you've added and expanded the soft drinks portfolio, and there's been a lot of discussion last year about what the potential is and what you can do, whether it's in Italy or other countries, I mean, but presumably, that's all on hold because you can't really -- it's tough to get at, all the bars are closed and your salesmen are at home. So -- but is there anything you can say? Is there anything going on there?
Yes. I can comment on that. So in Italy, there's no change to the focus, so to speak. But since we are a single serve, single unit sales, a lot of cans, then short term, we have a little bit tougher situation than the rest of the market and also on the occasion side. So I think when we start to see the people, again, go get into the street, we believe that we will be able to execute the plan that we have built for the year. And that we, during the first months of the year, actually, I would say, did very well. So until the end of February, we were gaining a lot of value share, both for our soft drink portfolio and for our beer portfolio. So that was -- that's a good start. In the export markets that we acquired from Campari, the soft drinks business is doing a good job. So growth rates are good. We are expanding distribution, and we are also expanding the promotional pressure. So moving in with not only single can promotions but also 4 and 6-pack. So that is working well. We got some listings before the virus came into place in other and newer territories, in particular for the Crodo lineup. But given that the change of shelves got into the middle of the COVID-19 as -- a number of these listings will be postponed to later during the year. So what we are working on intensively and continue to work on is to get the listings in place. But we will unfortunately lose a part of the season because of this. But the momentum and the feedback in terms of getting listings and getting positive feedback from our customers is unchanged. So where we got on shelf, we are doing well, where we are working on getting on shelf, we have -- we will have a time delay, but no change to the strategy. No reasons for that with the feedback that we get. And on the soft drink side with Lorina, we are experiencing that the lemonade part of the market is actually the category that is holding highest, whereas if you look at the numbers from the last 4 weeks, lemonade is, in principle, the only category that's growing, and we are growing share in that category with our artisanal clear lemonade. So the French business in terms of building up brand equity, increasing the presence in the store in spite of the fact that we cannot have people in the stores is actually performing well. So I think so far, I would say, the conclusion is that the soft drink focused part of our strategy is on a good track.
Okay. And I just had one last question about the wholesalers in Italy. I can't remember, do you deal with lots and lots of wholesalers? And is there a particular bad debt risk associated with those guys? Because presumably, they can't have any business. And what do you do about that?
So we have business. We do regular business with about 700 or so wholesalers. So it's pretty widespread. And they, of course, then have the exposure towards the bar and the restaurant. The way that we have dealt with Italy on the accounts receivables side through decades is to a large extent to use credit insurance because with the organization that we have locally, we do not have kind of like the same insights into all customers. So we have brought ourselves into that insight to understand how well positioned the customers are to pay. So a large part of our Italian On-Trade business is covered by credit insurance. That said, some customers are not. And of course, the exposure for those are higher than the ones where we have credit insurance. And the provision that we have made, the part that relates to Italy is relatively few customers. So even though that we have seen a lockdown situation, we have seen inflow of money from a lot of our customers anyway.
So does that keep you awake at night, the Italy situation from a perspective of bad debt?
I would say no, not with the knowledge that we have at this moment of time.
Thank you. We have no further questions at this time. Please go ahead.
Yes. Thank you. That concludes then, I think, our session. And we go back to trying to sell our products and keep ourselves safe, and we trust that you would do the same. Thank you for attending and listening and your questions.
That does conclude our conference for today. Thank you for participating. You may all disconnect.