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Operating costs and non-underlying items
 12 Months Ended
Dec. 31, 2020
Text Block [Abstract]  
Operating Costs and Non-underlying Items
3. Operating costs and
non-underlying
items
Operating costs
Operating costs include cost of sales, brand and marketing investment and overheads.
(i) Cost of sales
Cost of sales includes the cost of inventories sold during the period and distribution costs. The cost of inventories are raw and packaging materials and related production costs. Distribution costs are charged to the income statement as incurred.  
(ii) Brand and marketing investment
Brand and marketing investment include costs related to creating and maintaining brand equity and brand awareness. This includes media, advertising production, promotional materials and engagement with consumers. These costs are charged to the income statement as incurred.
(iii) Overheads
Overheads include staff costs associated with sales activities and central functions such as finance, human resources and research and development costs. Research and development costs are staff costs, material costs, depreciation of property, plant and equipment and other costs that are directly attributable to research and product development activities. These costs are charged to the income statement as incurred.
Non-underlying
items
These items are relevant to an understanding of our financial performance due to their nature and/or frequency of occurrence.
(i)
Non-underlying
items within operating profit
These are gains and losses on business disposals, acquisition and disposal-related costs, restructuring costs, impairments and other items within operating profit classified here due to their nature and/or frequency. Restructuring costs are charges associated with activities planned by management that significantly change either the scope of the business or the manner in which it is conducted.
(ii)
Non-underlying
items not in operating profit but within net profit
These are net monetary gain or loss arising from hyperinflationary economies and significant and unusual items in net finance cost, share of profit/ (loss) of joint ventures and associates and taxation.
 
   
€ million
   € million   € million 
   
2020
   2019   2018 
Turnover
  
 
50,724
 
   51,980    50,982 
Cost of sales
  
 
(28,684
) 
   (29,102)    (28,703) 
of which:
               
   
 
 
   
 
 
   
 
 
 
Distribution costs
  
 
(3,104
) 
   (3,089)    (3,057) 
Production costs
  
 
(3,696
) 
   (3,701)    (3,732) 
Raw and packaging materials and goods purchased for resale
  
 
(20,400
) 
   (20,769)    (20,516) 
Other
  
 
(1,484
) 
   (1,543)    (1,398) 
   
 
 
   
 
 
   
 
 
 
Gross profit
  
 
22,040
 
   22,878    22,279 
Selling and administrative expenses
  
 
(12,673
) 
   (12,931)    (12,816) 
of which:
               
   
 
 
   
 
 
   
 
 
 
Brand and marketing investment
  
 
(7,091
) 
   (7,272)    (7,150) 
Overheads
   (5,582
)
 		   (5,659)    (5,666) 
of which: Research and development
   (800
)
 		   (840)    (900) 
   
 
 
   
 
 
   
 
 
 
Non-underlying
items within operating profit before tax
  
 
(1,064
) 
   (1,239)    3,176 
   
 
 
   
 
 
   
 
 
 
Operating profit
  
 
8,303
 
   8,708    12,639 
   
 
 
   
 
 
   
 
 
 
Exchange losses within operating costs in 2020 are €45 million (2019: €41 million; 2018: €49 million).
Non-underlying
items
Non-underlying
items are disclosed on the face of the income statement to provide additional information to users to help them better understand underlying business performance.
 
   
€ million
   € million   € million 
   
2020
   2019   2018 
Non-underlying
items within operating profit before tax
  
 
(1,064
) 
   (1,239)    3176 
   
 
 
   
 
 
   
 
 
 
Acquisition and disposal-related costs
  
 
(69
) 
   (132)    76 
Gain on disposal of group companies
(a)
  
 
8
 
   70    4,331 
Restructuring costs
(b)
  
 
(916
) 
   (1,159)    (914) 
Impairments
(c)
  
 
—  
 
   (18)    (208) 
Other
(d)
  
 
(87
) 
   —      (109) 
   
 
 
   
 
 
   
 
 
 
Tax on
non-underlying
items within operating profit
  
 
272
 
   309    (259) 
   
 
 
   
 
 
   
 
 
 
Non-underlying
items within operating profit after tax
  
 
(792
) 
   (930)    2,917 
   
 
 
   
 
 
   
 
 
 
Non-underlying
items not in operating profit but within net profit before tax
  
 
(36
) 
   35    154 
   
 
 
   
 
 
   
 
 
 
Share of gain on disposal of Spreads business in Portugal JV
  
 
—  
 
   3    32 
Interest related to the UK tax audit of intangible income and centralised services
  
 
(56
) 
   —      —   
Net monetary gain arising from hyperinflationary economies
  
 
20
 
   32    122 
   
 
 
   
 
 
   
 
 
 
Tax impact of
non-underlying
items not in operating profit but within net profit
  
 
(146
) 
   (196)    (29) 
   
 
 
   
 
 
   
 
 
 
Impact of US tax reform
  
 
—  
 
   —      (29) 
Taxes related to the reorganisation of our European business
  
 
(58
) 
   (175)    —   
Taxes related to share buyback as part of Unification
  
 
(30
) 
   —      —   
Taxes related to the UK tax audit of intangible income and centralised services
  
 
(53
) 
   —      —   
Hyperinflation adjustment for Argentina deferred tax
  
 
(5
) 
   (21)    —   
   
 
 
   
 
 
   
 
 
 
Non-underlying
items not in operating profit but within net profit after tax
  
 
(182
) 
   (161)    125 
   
 
 
   
 
 
   
 
 
 
Non-underlying
items after tax
(e)
  
 
(974
) 
   (1,091)    3,042 
   
 
 
   
 
 
   
 
 
 
Attributable to:
               
Non-controlling
interest
  
 
(23
) 
   (28)    18 
Shareholders’ equity
  
 
(951
) 
   (1,063)    3,024 
   
 
 
   
 
 
   
 
 
 
 
(a)
2020 gain relates to a laundry bar business disposal. 2019 includes a gain of €57
 
million relating to the disposal of Alsa. 2018 includes a gain of €4,331
 
million on disposal of spreads business.
(b)
Restructuring costs are comprised of various supply chain optimisation projects and organisational change programmes across markets.
(c)
2019 includes a charge of €18
 
million relating to an impairment of goodwill for a local business classified to held for sale.
(d)
2020 includes a charge of €87
 
million for litigation matters in relation to investigations by national competition authorities.
(e)
Non-underlying items after tax is calculated as non-underlying items within operating profit after tax plus non-underlying items not in operating profit but within net profit after tax.