Not so fizzy
Coca-Cola misses analysts’ estimates
Coca-Cola will step up its bid to transform the company into a far leaner operation under incoming chief executive James Quincey after quarterly earnings missed estimates.
The soda giant vowed to cut costs by an additional US$800 million ($1.2 billion) a year, adding to a plan to wring US$3 billion in savings.
That will include 1200 job cuts through 2018. The belt-tightening effort accompanies a move to spin off much of Coca-Cola’s bottling operations, one of the company’s biggest strategic changes in decades.
The 52-year-old Quincey takes the reins on May 1, from Muhtar Kent, who has been divesting bottling plants around the world. The company is trying to re-emerge as a more focused — and profitable — business, which will concentrate on developing new drinks and selling ingredients to partners.
For now, the changes are taking a toll on results. Coca-Cola posted firstquarter earnings of US43c a share yesterday, short of the US44c predicted by analysts. A decline in soda volumes and currency fluctuations also continued to weigh on sales.
Revenue fell 11 per cent last quarter, with the structural changes ac- counting for 10 per cent of the decline, the Atlanta-based company said.
The overhaul makes it more difficult for investors to assess the results, said Ken Shea, an analyst at Bloomberg Intelligence.
“It’s hard to find the underlying profitability with this company at the moment,” he said. “It’s almost like investors have to take the company’s word for, ‘Look, we’re going to get out of this plumbing change at the end of the year and at that point we’ll have our operating model in place to do some nice things’.”
On the bright side, Coca-Cola’s earnings per share may not decline as much as expected during the full year. The company now projects a drop of 1 per cent to 3 per cent, compared with a previous prediction of as much as 4 per cent. Organic revenue, which excludes currency effects and structural changes, is expected to grow 3 per cent.
Coca-Cola and rival PepsiCo are scrambling to add more non-cola beverages, coping with a shift by consumers away from traditional soft drinks. Per capita consumption of soda beverages sank to a 31-year low in the US in 2016, according to Beverage-Digest, a trade publication.
Coca-Cola will have a chief growth officer and a chief innovation officer reporting directly to the CEO when he takes charge next week.
“We’ve laid out a clear path to transform the company for the future to be bigger than our past — to be a company that is bigger than the CocaCola brand,” Quincey said.
It has also shifted its strategy to focus on profit growth, rather than volume. That’s included the introduction of smaller cans and bottles, which fetch higher prices per ounce than larger packages. After promoting the smaller packs in the US, the company is now taking the concept to emerging markets.