Coca Cola - Making Money, Slowly
The Coca-Cola Company is a nonalcoholic beverage company in the world and one of the world's most recognizable brands. It is home to more than 500 beverage brands, some 20 of those billion-dollar-brands, including four of the top five soft drinks: Coca-Cola, Diet Coke, Fanta, and Sprite. In addition to soft drinks, it markets waters, enhanced water and sports drinks; juice drinks, dairy and plant-based beverages, ready-to-drink teas and coffees and energy drinks. Other top brands include Minute Maid, Powerade, Dasani, Honest Tea, and vitaminwater. With the world's largest beverage distribution system, Coca-Cola reaches thirsty consumers in more than 200 countries. Nearly 70% of its sales comes from outside the US.
Latest Earnings Performance
Coca-Cola managed to beat analysts' expectations in Q3 2020. Revenue for Q3 2020 declined 9% to $8.7 billion but was higher than expectations of $8.4 billion. Adjusted profit for the quarter came in at $0.55 per share, this was better than the $0.46 profit that Wall Street had predicted. All four of Coke’s drink categories reported declines in unit case volume. Sparkling soft drinks was the least affected, with its volume falling only 1%. Demand for Coke Zero Sugar and trademark Coke drinks lifted the category, although overall it was hurt by the decline in the North American fountain business. Juice, dairy, and plant-based drinks saw volumes shrink by 6%, hurt by pressure in Asia Pacific and Latin America. Unit case volume of water, enhanced water, and sports drinks fell by 11%. Tea and coffee was the hardest hit, with demand dropping 15%, primarily due to the company’s Costa cafes.
FY 2019 Earnings Performance
Coca-Cola revenues came in at $37.3 billion in 2019, marking a growth of 9% compared to 2018. Higher revenue was driven by price/mix growth of 5% and concentrate sales growth of 1%. Sparkling soft drinks grew 2%, driven by strong global growth in trademark Coca-Cola, including growth in original Coca-Cola and continued growth in Coca-Cola Zero Sugar. Water, enhanced water, and sports drinks grew 3%, led by Ciel and Cristal in Latin America and strong global growth in the sports drinks portfolio, partially offset by the impact of deprioritization of low-margin water brands in key markets, such as China and Japan. Tea and coffee volume grew 1% led by strong performance across the company's portfolio in Japan, in addition to the doÄŸadan tea business in Turkey and Gold Peak tea in North America. Juice, dairy, and plant-based beverages remained flat as strong performance by Chi in West Africa and innocent juices in Europe was offset by a decline in Rani in the Middle East. Adjusted earnings came in at $2.11 per share in 2019, marginally higher than 2.08/share in the year-ago period.
Coca-Cola looking to improve profitability under a new CEO
The new Chief Executive Officer, James Quincey, has laid out plans to improve the Coca-Cola's profitability that goes beyond its refranchising to laying-off workers. The company plans to redesign its organization to make it faster and more agile, and as it creates a more focused, leaner corporate center and broadened enabling services, it could result in the laying off of around 1,200 workers beginning in the second half of this year and carrying into the next year.
Coca-Cola restructuring its way to more profitability
Coca-Cola is refranchising many of its bottling operations in a bid to move away from the capital intensive and low margin business of bottling, and focus more on the concentrate business as the consumption of carbonated drinks continues to slow down, especially in developed markets. Coca-Cola's net sales growth has been hurt in the last few quarters due to structural changes. In 2017, the company accomplished major milestones in three of its most important markets. The bottling businesses in China was sold; KO's two largest bottlers in Japan merged creating a single bottler, covering roughly 85% of the system; and most importantly, Coca-Cola completed the refranchising of its U.S. bottling operations. A bottling business comes with four to five times more revenue per drink sold and the accompanying cost. Thus, any impact on the sales of the bottler is going to have a magnified impact on overall sales for Coca-Cola and much less effect on the company's profits. Coca-Cola is, therefore, focusing more on capitalizing on profitability in the concentrate business and looking to refranchise some of its bottling investments.
Latest Earnings Performance
Coca-Cola managed to beat analysts' expectations in Q3 2020. Revenue for Q3 2020 declined 9% to $8.7 billion but was higher than expectations of $8.4 billion. Adjusted profit for the quarter came in at $0.55 per share, this was better than the $0.46 profit that Wall Street had predicted. All four of Coke’s drink categories reported declines in unit case volume. Sparkling soft drinks was the least affected, with its volume falling only 1%. Demand for Coke Zero Sugar and trademark Coke drinks lifted the category, although overall it was hurt by the decline in the North American fountain business. Juice, dairy, and plant-based drinks saw volumes shrink by 6%, hurt by pressure in Asia Pacific and Latin America. Unit case volume of water, enhanced water, and sports drinks fell by 11%. Tea and coffee was the hardest hit, with demand dropping 15%, primarily due to the company’s Costa cafes.
FY 2019 Earnings Performance
Coca-Cola revenues came in at $37.3 billion in 2019, marking a growth of 9% compared to 2018. Higher revenue was driven by price/mix growth of 5% and concentrate sales growth of 1%. Sparkling soft drinks grew 2%, driven by strong global growth in trademark Coca-Cola, including growth in original Coca-Cola and continued growth in Coca-Cola Zero Sugar. Water, enhanced water, and sports drinks grew 3%, led by Ciel and Cristal in Latin America and strong global growth in the sports drinks portfolio, partially offset by the impact of deprioritization of low-margin water brands in key markets, such as China and Japan. Tea and coffee volume grew 1% led by strong performance across the company's portfolio in Japan, in addition to the doÄŸadan tea business in Turkey and Gold Peak tea in North America. Juice, dairy, and plant-based beverages remained flat as strong performance by Chi in West Africa and innocent juices in Europe was offset by a decline in Rani in the Middle East. Adjusted earnings came in at $2.11 per share in 2019, marginally higher than 2.08/share in the year-ago period.
Coca-Cola looking to improve profitability under a new CEO
The new Chief Executive Officer, James Quincey, has laid out plans to improve the Coca-Cola's profitability that goes beyond its refranchising to laying-off workers. The company plans to redesign its organization to make it faster and more agile, and as it creates a more focused, leaner corporate center and broadened enabling services, it could result in the laying off of around 1,200 workers beginning in the second half of this year and carrying into the next year.
Coca-Cola restructuring its way to more profitability
Coca-Cola is refranchising many of its bottling operations in a bid to move away from the capital intensive and low margin business of bottling, and focus more on the concentrate business as the consumption of carbonated drinks continues to slow down, especially in developed markets. Coca-Cola's net sales growth has been hurt in the last few quarters due to structural changes. In 2017, the company accomplished major milestones in three of its most important markets. The bottling businesses in China was sold; KO's two largest bottlers in Japan merged creating a single bottler, covering roughly 85% of the system; and most importantly, Coca-Cola completed the refranchising of its U.S. bottling operations. A bottling business comes with four to five times more revenue per drink sold and the accompanying cost. Thus, any impact on the sales of the bottler is going to have a magnified impact on overall sales for Coca-Cola and much less effect on the company's profits. Coca-Cola is, therefore, focusing more on capitalizing on profitability in the concentrate business and looking to refranchise some of its bottling investments.
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