Coca-Cola Co. sales are inching back toward normal, even as it warns a resurgent virus could continue to muddle near-term results. The company—which pulled most advertising in the early days of the pandemic—continues to be judicious with its marketing, slashing spending by 30 percent in the third quarter compared with the year-earlier period.
Global unit case volume was down 4% in the third quarter as the restaurants and entertainment venues that make up about half of revenues aren’t yet back to normal. Still, that’s far better than the second quarter when volume fell 16%. Some increase in at-home consumption has helped offset the problems in public spaces.
“Our brand portfolio is working hard to return to pre-COVID levels of growth and we have made progress,” CEO James Quincey said on an earnings call.
“However, it’s important to remember the world is in a fragile state, and we’ve seen reopening trends begin to moderate,” he added. “We don’t expect to return to the peak levels of global lockdown, but we are prepared for setbacks due to the local spikes in cases and targeted restrictions and closures.”
Shares rose as much as 2.4% at 9:30 a.m. in New York. They were down 9.7% through Wednesday’s close.
Coke executives said in July that the soda giant had made it through the worst of the downturn. Still, Quincey warned this summer that the global economy could take two to three years to recover. The sequential improvement is slow: The percentage decline in global unit case volume for October month-to-date remained in the low single digits.
There were some bright spots in the quarter. Trademark Coca-Cola grew 1%, it said, while Coca-Cola Zero Sugar grew 7% in the quarter, it said. At the same time, tea and coffee declined 15%, primarily driven by virus-related challenges at Costa retail stores, it said in a statement.
The company will continue to cut down the number of products it sells, with a goal of offering about 200 master brands, a 50% reduction from the current level. Earlier this month, it said it would be dropping some lower-performing items like Tab diet soda and Zico coconut water in the U.S. Dropping the product lines will only result in an about 1% hit to profits, he said on the earnings call.
“We’re trying to end up with a blueprint that we think is right for the future,” Chief Financial Officer John Murphy said in an interview. “We’re going to have to make some tough decisions.”
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October 22, 2020 at 11:07PM
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