Coca-Cola reported better-than-expected sales and profit figures yesterday as the partial reopening of entertainment venues and the hospitality sector boosted demand for its drinks. However, the global beverage giant sounded a cautious note over new coronavirus-related restrictions and again declined to provide a financial outlook.
The Coca-Cola Company’s total revenue during its third-quarter ending 25 September fell 9% to $8.7bn. However, this was a significant improvement on the 28% decline in the previous quarter which led the group to announce a major restructuring plan and accelerate moves to ditch underperforming brands.
Meanwhile, operating income declined 8% in the quarter, against a 34% fall in the prior period. The group said margin expansion was primarily driven by cost management, partially offset by top-line pressures and currency headwinds.
Coca-Cola stated that the pandemic had continued to impact its away-from-home channels, although this was partially offset by raised growth in at-home channels.
North America was the best-performing region with organic revenues down only 3%, compared to a 6% decline in its Europe, Middle East & Africa unit, and 8% fall in the Asia Pacific.
John Murphy, Chief Financial Officer, said improved consumer mobility during the quarter had increased Coca-Cola’s volumes. However, he said the performance of out-of-home venues in the US remained “very mixed”. Hospitality, recreation and leisure sectors were also still “heavily impacted” by the pandemic, offsetting improvements in fast food.
By product group, its trademark Coca-Cola brand grew sales by 1%, led by the Zero Sugar variant which increased 7% in the quarter. However, juice, dairy and plant-based beverages declined 6%, whilst water and sports drinks fell 11%. Tea and coffee also declined 15%, primarily driven by coronavirus-related pressure on its Costa retail stores.
Coca-Cola stated that recent “strategic actions” had given it increased confidence in emerging stronger from the pandemic. The company confirmed yesterday that it plans to cut the number of brands by half to about 200 and phase out products like ZICO coconut water and TaB sodas as part of its strategy to streamline its beverage portfolio and focus more on popular, higher growth products.
“Throughout this year’s crisis, our system has remained focused on its beverages for life strategy,” said James Quincey, chairman and CEO.
“We are accelerating our transformation that was already underway, shaping our company to recover faster than the broader economic recovery. While many challenges still lie ahead, our progress in the quarter gives me confidence we are on the right path.”
However, in contrast to other companies that have recently reinstated financial targets, including rival PepsiCo, Coca-Cola declined to provide a financial outlook for investors. It stated that it was impossible to predict consumption trends accurately as restrictions are reimposed in some markets.
Quincey said the situation was “dynamic”, as rising cases during the winter could result in regional lockdowns, adding the recovery in “away-from-home” sales had shown signs of stalling in recent weeks.
The better-than-forecast earnings did push shares in the company up over 1% yesterday, having fallen 9% so far this year.