Global Lockdowns Chill Coke's Sales -- WSJ

By Jennifer Maloney 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 22, 2020).

Coca-Cola Co. said its global sales volume has fallen 25% since the beginning of April amid pandemic lockdowns, and cautioned that consumer spending won't immediately bounce back as countries begin to reopen.

"We may be at the end of the big global lockdown, but we are still a long way from the new normal," Chief Executive James Quincey said on a call with analysts Tuesday.

In China, where Coke's plants are running and employees have returned to company offices in Shanghai, there are still limits on crowd sizes, and consumption is down from last year, Mr. Quincey said. And other places such as Tokyo are implementing a second round of restrictions, he noted.

About half of Coca-Cola's business is generated by away-from-home retail channels -- the restaurants, bars, movie theaters and sports stadiums that have been shut world-wide. The company has also seen a decline in on-the-go drinks typically sold in convenience stores, Mr. Quincey said. The company expects the sharpest impact on its sales in the second quarter of this year. Roughly two-thirds of its sales are outside North America.

As economies enter a phase of graduated reopenings, consumers will continue to lean heavily on e-commerce because of "the specter of the virus over us," Mr. Quincey said. He said he also expects to see "a very profound theme of affordability," as shoppers brace for an economic downturn.

"As the virus crisis abates, economic crisis will be the next phase," Mr. Quincey said on a call with reporters Tuesday.

The beverage giant can shift toward refillable bottles, smaller packages and multipacks -- all with lower price points, the CEO said. He added that he expects long-term consumer trends toward pricier, healthier beverages to continue but at a slower rate.

"It's not so much of a time for trying out all sorts of new and different things if incomes are under pressure," Mr. Quincey said. "You tend to go back to what is known. There will be some favoring of tried and trusted in the short term."

Coke has cut marketing and capital spending and has put 16,000 Costa Coffee café employees in the U.K. on paid furlough through June. Executives said they are focusing on supplying grocery stores with core brands to help them simplify their supply chains. And the beverage giant is canceling smaller projects in its R&D pipeline to focus resources on developing products that could scale more easily, Mr. Quincey said.

The soda giant, whose brands include Dasani water, Minute Maid orange juice and Powerade, reported lower revenue for the March-ended quarter, with sales down 1% to $8.6 billion. The Atlanta company said organic revenue, which excludes the effect of currency swings, acquisition and divestitures, was flat.

For the quarter, Coca-Cola reported earnings of $2.76 billion, compared with $1.68 billion in the comparable quarter last year. Adjusted earnings were 51 cents a share, ahead of the 44 cents analysts had expected.

Unit-case volume for its carbonated soft drinks, which include its namesake soda, Diet Coke, Fanta and Sprite, fell 2% for the quarter, led by a decline in Asia Pacific, particularly China. It was the company's first quarterly decline in global sales volume since 2016, according to FactSet.

--Dave Sebastian contributed to this article.

Write to Jennifer Maloney at [e-mail]

(END) Dow Jones Newswires

April 22, 2020 02:47 ET (06:47 GMT)

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