The following Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the Consolidated Financial Statements and accompanying Notes contained in "Item 8-Financial Statements and Supplementary Data."

Overview

Business

Coca-Cola Enterprises Inc. ("we," "our," or "us") is the world's largest marketer, producer, and distributor of nonalcoholic beverages. We market, produce, and distribute our products to customers and consumers through license territories in 46 states in the United States (U.S.), the District of Columbia, the U.S. Virgin Islands and certain other Caribbean islands, and the 10 provinces of Canada (collectively referred to as North America). We are also the sole licensed bottler for products of The Coca-Cola Company (TCCC) in Belgium, continental France, Great Britain, Luxembourg, Monaco, and the Netherlands (collectively referred to as Europe).

We operate in the highly competitive beverage industry and face strong competition from other general and specialty beverage companies. Our financial results, like those of other beverage companies, are affected by a number of factors including, but not limited to, cost to manufacture and distribute products, general economic conditions, consumer preferences, local and national laws and regulations, availability of raw materials, fuel prices, and weather patterns.

Sales of our products tend to be seasonal, with the second and third quarters accounting for higher unit sales of our products than the first and fourth quarters. In a typical year, we earn more than 60 percent of our annual operating income during the second and third quarters of the year. Sales in Europe tend to experience more seasonality than those in North America due, in part, to a higher sensitivity of European consumption to weather conditions.

Relationship with TCCC

We are a marketer, producer, and distributor principally of products of TCCC with approximately 93 percent of our sales volume consisting of sales of TCCC products. Our license arrangements with TCCC are governed by licensing territory agreements. TCCC owned approximately 35 percent of our outstanding shares as of December 31, 2008. Our financial results are greatly impacted by our relationship with TCCC. Our collaborative efforts with TCCC are necessary to
(1) create and develop new brands and packages; (2) market our products in the most effective manner possible; and (3) find ways to maximize efficiency. For additional information about our transactions with TCCC, refer to Note 3 of the Notes to Consolidated Financial Statements.

Strategic Priorities

During 2008, difficult business conditions and macroeconomic weakness in North America combined to drive our results well below expected levels. As a result, we undertook a comprehensive business review of our North American operations with the goal of addressing the limitations of our North American business model and how best to accelerate the scope and pace of change needed to restore growth and profitability to North America. We also took several immediate actions, including implementing a price increase in September 2008 principally impacting our U.S. multi-serve consumption channels, and investing in single-serve consumption channels. During our review, we worked closely with TCCC to develop strategies that addressed our fundamental issues and opportunities, including our system supply chain, operations, and price-package architecture.

As we performed our review, we remained focused on the three key objectives of our Global Operating Framework, which are: (1) being number one or a strong number two in every beverage category in which we choose to compete; (2) being our customers' most valued supplier; and (3) establishing a winning and inclusive culture in our work force. The following is a summary of the key initiatives that will drive our future performance and enable us to achieve our vision of being the best beverage sales and customer service company:

† Strengthen our brand portfolio

We must continue to find ways to strengthen our position in each beverage category by growing the value of our existing brands, while at the same time strategically broadening our presence in fast growing beverage groups. Strengthening our position in each beverage category involves the creation of new brand initiatives, as well as price-package architecture improvements that balance channel profitability and enhance existing brand value. One of the keys to reinvigorating sales of our sparkling beverages - a category that has declined in recent years - is the ongoing activity surrounding our "Red, Black, and Silver" three-cola initiative, which maximizes the power of

Coca-Cola, one of the world's most valuable brands. Outstanding growth of Coca-Cola Zero in most of our territories has generated great success with this initiative thus far. While sparkling beverages remain vital to our success, we must also continue to seek strategic opportunities to broaden our presence in faster growing beverage groups. As an example, during 2008, we entered into distribution agreements with Hansen Beverage Company (Hansen), the developer, marketer, seller and distributor of Monster Energy drinks, the leading volume brand in the U.S. energy drink category. Under these agreements, we began distributing Monster products in certain of our U.S. territories during 2008, and will expand our distribution into our Canadian and European territories during 2009.

Essential to our future growth is leveraging our powerful relationship with TCCC, who has demonstrated its commitment to expanding its product portfolio in recent years. TCCC has greatly enhanced our still beverage portfolio with the acquisitions of glacéau, a producer of branded enhanced water products including vitaminwater, and Fuze, a maker of enhanced juices and teas. In addition, during 2008, TCCC acquired Abbey Well, a producer of mineral water in Great Britain. This acquisition represents an important first step in creating a viable water strategy in Great Britain.

A resulting action from our North American business review was the development of price-package architecture initiatives that focus on revitalizing our sparkling beverages in both single-serve and multi-serve consumption channels. These initiatives will enhance brand equity, balance profit across packages and channels, and drive recruitment of new consumers of our products. During 2009, our revitalization efforts for sparkling beverages will include new diversified package configurations designed to better meet consumer needs and relieve pricing pressure on 12-pack cans and two-liter bottles. These diversified packages include 14 ounce and 16 ounce PET (plastic) bottles in our single-serve consumption channels and 20, 18, and 8-pack can configurations in our multi-serve consumption channels.

†Transform our go-to-market model and improve efficiency and effectiveness

With the economic and operational headwinds impacting our business, it is essential that we have a world-class system in place that allows us to put the right product and package in consumers' hands at the right time and price. More than ever, we are emphasizing streamlined operations, consistent execution, and the flexibility to serve customers based on their specific needs. In North America, we have entered into a joint initiative with TCCC to create an integrated supply chain company that will consolidate common supply chain activities, including infrastructure planning, sourcing, production planning, and transportation. This entity will commence operations in 2009 and, by optimizing product flow and reducing inefficiencies within the Coca-Cola System, is expected to generate approximately $150 million in total annual savings by 2011, which will be split between us and TCCC. Partnering this integrated supply chain initiative with existing programs, such as Customer Centered Excellence, will allow us to improve our execution, and most importantly, deliver improved service to our customers.

As we continue to transform our go-to-market model, we must also continue to seek opportunities to improve our efficiency and effectiveness. This includes driving improved consistency and best practices across our organization, as well as certain structural changes. In recent years, we have made significant progress in this area, but in light of the current operating environment, we must do more. As part of our comprehensive North American business review, we identified several key marketplace and operating issues that were restricting our performance and limiting our

ability to deliver value to our customers. In response to these issues, we have implemented the following initiatives: (1) reduced the number of U.S. business units from six to four to create a more streamlined and simplified organization;
(2) instituted Ownership Cost Management (OCM) practices in North America after achieving great success in Europe by reducing operating expenses through increased levels of cost accountability; (3) developed a new incidence-based economic model in the U.S. with TCCC that better aligns system interests across all packages and consumption channels; and (4) strengthened our SKU management practices through our SKU Rationalization program. These initiatives are just a part of our commitment to develop more efficient operating methods that allow us to serve our customers smarter, faster, and with greater consistency.

† Commitment to Our People

Our people are at the core of every action, strategy, and initiative we undertake in our quest to generate long-term sustainable growth. As such, we must attract, develop, and retain a highly talented and diverse workforce in order to further establish a winning and inclusive culture. We are working aggressively to succeed against this objective by standardizing job responsibilities, improving training opportunities, and creating a more visible career path for our employees. In addition, our talent management review process includes an enhanced focus on succession planning and leadership development to improve our bench strength and prepare our next generation of leaders.

Responsibility to the Communities We Serve

Corporate Responsibility and Sustainability (CRS), which is where our business touches the world and where the world touches our business, is an important aspect of our long-term success that is linked directly to our strategic priorities. Our sustainability is dependent on the product portfolio we offer to our customers, so while we grow the value of our existing brands and expand our portfolio, we must ensure the products we offer are in line with consumer preferences. Our responsibility is to know how our business affects others around us, both socially and environmentally. To that end, we are demonstrating our social commitment to CRS by creating a diverse and inclusive culture where talented people are placed in the right positions with the right opportunities. Our environmental commitment to CRS is demonstrated through water stewardship initiatives at our production facilities that include more efficient water treatment processes, through energy conservation with the continued expansion of our hybrid truck fleet, and through the development of cost-efficient solutions for reclaiming used beverage containers and establishing recycling centers within our U.S. territories. In fact, our recently established subsidiary, Coca-Cola Recycling, aspires to recycle the equivalent of 100 percent of our packaging. These efforts are not only improving our business performance, but are also making us a more responsible corporate citizen to the communities we serve.

Financial Results

During 2008, we had a net loss of $4.4 billion or $9.05 per common share, compared to net income of $711 million or $1.46 per diluted common share in 2007. The following items that are included in our reported results affect the comparability of our year-over-year financial results:

2008

• noncash impairment charges totaling $7.6 billion ($4.9 billion net of tax, or $10.18 per common share) to reduce the carrying amount of our North American franchise license intangible assets to their estimated fair value based upon the results of our interim and annual impairment tests of these assets;

• charges totaling $134 million ($87 million net of tax, or $0.17 per common share) related to restructuring activities, primarily in North America and to streamline and reduce the cost structure of our global back-office functions; and

• a net tax expense totaling $11 million ($0.02 per common share) primarily related to the deferred tax impact of merging certain of our subsidiaries.

2007

• charges totaling $121 million ($79 million net of tax, or $0.16 per diluted common share) related to restructuring activities, primarily in North America;

• a $20 million ($14 million net of tax, or $0.03 per diluted common share) gain on the sale of land;

• a $13 million ($8 million net of tax, or $0.02 per diluted common share) benefit from a legal settlement accrual reversal;

• a $12 million ($8 million net of tax, or $0.02 per diluted common share) loss on the extinguishment of debt;

• a $14 million ($10 million net of tax, or $0.02 per diluted common share) loss to write off the value of Bravo! warrants;

• a $12 million ($8 million net of tax, or $0.02 per diluted common share) gain on the termination of our Bravo! master distribution agreement (MDA); and

• a net tax benefit totaling $99 million ($0.20 per diluted common share) from United Kingdom, Canadian, and U.S. state tax rate changes.

Financial Summary

Our financial performance during 2008 was impacted by the following significant factors:

• Difficult macroeconomic conditions in the U.S. that contributed to lower sales of our higher-margin packages, particularly for 20-ounce sparkling beverages and water, and lower than expected growth in some higher-margin emerging beverage categories;

• Increased input costs, particularly in North America, driven by (1) package mix shifts associated with higher-cost still beverages that are purchased as finished goods, and (2) higher raw material costs, including HFCS (sweetener) and PET (plastic);

• Higher cost of sparkling beverage concentrate, including an approximately 7.5 percent increase in September 2008, along with the permanent elimination of $35 million in marketing funding from TCCC;

• Strong pricing growth in North America driven by the positive mix shift associated with higher-priced still beverages, and a rate increase in September 2008 of approximately 7.5 percent principally impacting our U.S. multi-serve consumption channels;

• Balanced volume and pricing growth in Europe reflecting strong marketplace execution and solid brand development;

• Continued strong performance of Coca-Cola Zero across most of our territories, and the benefit of recent product additions to our still beverage portfolio, including glacéau, Fuze, and Campbell's products;

• Increased delivery expenses in North America due to higher fuel cost;

• Operating expense control initiatives throughout our organization that helped limit the growth of our underlying operating expenses;

• Decreased interest expense as a result of a lower average outstanding debt balance; and

• A lower underlying effective tax rate due to changes in the mix of income between North America and Europe.

Revenue and Volume

In North America, our bottle and can net price per case grew 5.5 percent as a result of the positive mix shift associated with our expanded still beverage portfolio, including higher-priced glacéau products, and a rate increase in September 2008 of approximately 7.5 percent principally impacting our U.S. multi-serve consumption channels. These positive factors were offset by difficult macroeconomic conditions in the U.S. that contributed to significantly lower sales of our higher-priced single-serve packages, particularly 20-ounce sparkling beverages and water, which declined approximately 10.0 percent, and lower than expected growth in some higher-priced emerging beverage categories. Our volume declined 1.5 percent during 2008, including a 7.0 percent decline in the fourth quarter of the year. This performance reflects the negative impact of our price increases, particularly in the fourth quarter, continued softness in the sparkling beverage category, and lower sales of our higher-margin products and packages. Despite these negative factors, we benefited from the strong performance of Coca-Cola Zero as a central component of our "Red, Black, and Silver" three-cola initiative, increased sales in our expanded still beverage portfolio, and marketing initiatives, particularly those surrounding the 2008 Summer Olympics.

During 2009, we expect our net price per case to benefit from the full-year impact of our September 2008 rate increase, while our volume is expected to decline as we manage through the market and competitor response to our pricing actions, persistent softness in the sparkling beverage category, and continued pressure from the challenging macroeconomic conditions.

Our operations in Europe delivered solid performance during 2008 with volume growth of 3.0 percent and net price per case up 2.0 percent. These results reflect strong marketplace execution and solid brand development in both Great Britain and in continental Europe. Our volume growth was driven by the continued success of our "Boost Zone" marketing initiatives and strong promotional activity surrounding the Euro 2008 soccer tournament and the 2008 Summer Olympics. We experienced renewed growth of our regular Coca-Cola and Diet Coke brands in Great Britain and continued to experience increased volume of Coca-Cola Zero across our continental European territories. During the latter part of 2008, we also made a positive move to enhance our water brand strategy in Great Britain through the addition of Abbey Well mineral water. During 2009, we will continue to focus on strong execution and product development as we work through the potential impact that the global economic slowdown and changing consumer buying habits may have on our European operations.

Cost of Sales

Our consolidated bottle and can ingredient and packaging cost per case grew 6.5 percent during 2008. In North America, higher costs associated with still beverages purchased as finished goods, continued increases in the cost of key raw materials, and higher cost of sparkling beverage concentrate led to a year-over-year bottle and can ingredient and packaging cost per case increase of 8.0 percent. In September 2008, TCCC increased the price we pay for sparkling beverage concentrate approximately 7.5 percent and permanently eliminated $35 million in marketing funding. TCCC's actions were in response to the marketplace pricing we took in September 2008. Our 2008 cost of sales increase in Europe was in-line with increases we have experienced in recent years and we expect a similar increase in 2009. In North America, we expect our cost of sales to remain above historical averages in 2009 and to be substantially higher in 2009 than market prices as a result of supply agreements and hedging instruments that have locked us into higher prices for a significant amount of our expected purchases.

Operating Expenses

Our continued focus on operating expense initiatives, along with the benefit of our restructuring activities that are enhancing the effectiveness and efficiency of our organization, allowed us to limit the growth of our underlying operating expenses again during 2008. In Europe, we generated significant cost savings through the implementation of OCM, which placed an enhanced emphasis on reducing and eliminating operating expenses. We are in the process of implementing OCM throughout our North American operations and at Corporate and expect to experience additional savings benefits during 2009.

Our delivery costs in North America continued to increase during 2008 as a result of higher fuel cost. We also experienced increased warehousing costs due, in part, to an increase in the number of SKUs associated with our expanded product portfolio. During 2009, we expect our fuel expenses to be consistent with 2008 levels as a result of our hedging instruments.

Operations Review



The following table summarizes our Consolidated Statements of Operations as a
percentage of net operating revenues for the years ended December 31, 2008,
2007, and 2006:



                                                      2008       2007      2006
                                                      -----      -----     -----
     Net operating revenues                           100.0 %    100.0 %   100.0 %
     Cost of sales                                     63.1       61.9      60.9
                                                      ----- --   ----- -   ----- --
     Gross profit                                      36.9       38.1      39.1
     Selling, delivery, and administrative expenses    30.8       31.1      31.9
     Franchise license impairment charges              35.0        0.0      14.8
                                                      ----- --   ----- -   ----- --
     Operating (loss) income                          (28.9 )      7.0      (7.6 )
     Interest expense, net                              2.7        3.0       3.2
                                                      ----- --   ----- -   ----- --
     (Loss) income before income taxes                (31.6 )      4.0     (10.8 )
     Income tax (benefit) expense                     (11.5 )      0.6      (5.0 )
                                                      ----- --   ----- -   ----- --
     Net (loss) income                                (20.1 )%     3.4 %    (5.8 )%
                                                      ----- --   ----- -   ----- --

The following table summarizes our operating (loss) income for the years ended December 31, 2008, 2007, and 2006 (in millions; percentages rounded to the nearest 0.5 percent):

                                                  2008                      2007                     2006
                                          ---------------------     --------------------     ---------------------
                                                       Percent                  Percent                   Percent
                                           Amount      of Total     Amount      of Total      Amount      of Total
                                          --------     --------     -------     --------     --------     --------
North America                             $    904         14.5 %   $ 1,129         77.0 %   $  1,211         81.0 %
Europe                                         891         14.0         810         55.0          718         48.0
Corporate                                     (469 )       (7.5 )      (469 )      (32.0 )       (502 )      (33.5 )
Franchise license impairment charges(A)     (7,625 )     (121.0 )       0.0          0.0       (2,922 )     (195.5 )
                                          - ------ -   -------- -   - ----- -   -------- -   - ------ -   -------- -
Consolidated                              $ (6,299 )      100.0 %   $ 1,470        100.0 %   $ (1,495 )      100.0 %
                                          - ------ -   -------- -   - ----- -   -------- -   - ------ -   -------- -

2008 versus 2007

During 2008, we had an operating loss of $6.3 billion compared to operating income of $1.5 billion in 2007. The following table summarizes the significant components of the change in our 2008 operating (loss) income (in millions; percentages rounded to the nearest 0.5 percent):

                                                                                Change
                                                                               Percent
                                                                  Amount       of Total
                                                                 --------      --------
Changes in operating (loss) income:
Impact of bottle and can price, cost, and mix on gross profit    $    100           7.0 %
Impact of bottle and can volume on gross profit                       (45 )        (3.0 )
Impact of bottle and can selling day shift on gross profit             35           2.5
Impact of Jumpstart funding on gross profit                           (15 )        (1.0 )
Impact of post mix, non-trade, and other on gross profit              (13 )        (1.0 )
Selling, delivery, and administrative expenses                       (151 )       (10.5 )
Net impact of restructuring charges                                   (13 )        (1.0 )
Net impact of legal settlements and accrual reversals                  (8 )        (0.5 )
Gain on sale of land                                                  (20 )        (1.5 )
Franchise license impairment charges                               (7,625 )      (518.5 )
Currency exchange rate changes                                        (14 )        (1.0 )
                                                                 - ------ -    -------- --
Change in operating (loss) income                                $ (7,769 )      (528.5 )%
                                                                 - ------ -    -------- --

2007 versus 2006

During 2007, we had operating income of $1.5 billion compared to an operating loss of $1.5 billion in 2006. The following table summarizes the significant components of the change in our 2007 operating income (loss) (in millions; percentages rounded to the nearest 0.5 percent):

                                                                             Change
                                                                            Percent
                                                                Amount      of Total
                                                                -------     --------
Changes in operating income (loss):
Impact of bottle and can price, cost, and mix on gross profit   $   128          8.5 %
Impact of bottle and can volume on gross profit                     (85 )       (5.5 )
Impact of bottle and can selling day shift on gross profit           28          2.0
Impact of Jumpstart funding on gross profit                         (39 )       (2.5 )
Selling, delivery, and administrative expenses                      (46 )       (3.0 )
Net impact of restructuring charges                                 (55 )       (3.5 )
Net impact of legal settlements and accrual reversals                22          1.5
. . .