The Coca-Cola Company said it is hoping the worst of the COVID-19 pandemic is behind them following a 28% net revenue drop to $7.2 billion during Q2, according to the conglomerate’s quarterly earnings report today, ending what CEO James Quincy said was arguably “the toughest and most complex quarter in Coca-Cola history.”
Operating income fell 34% in the quarter while global case unit volume declined 16%. Organic revenue dropped 26%, including a 22% fall in concentrate sales and a 4% slide in price/mix. Year-to-date cash from operations decreased 28% to $2.8 billion.
The core Coke line fell 7% while Coke Zero Sugar only declined 4%. Water, enhanced water and sports drinks fell 24% while tea and coffee dropped 31%.
Speaking to investors and analysts today, Quincey said he believed Coke has already experienced its “peak levels” of impact from the global lockdown, though he acknowledged that the possibility of second waves of virus outbreaks, and a reinstitution of shutdown measures, could happen in the near future. He added that the company aligns with consensus forecasts that the global economy could take two to three years to recover from the crisis.
Despite the uncertainty, Quincey remained optimistic about Coke’s ability to handle the crisis moving forward. As well, the company outperformed analyst expectations, closing the trading day with a 2.34% stock price increase to $47.20 per share.
“Moving forward, we are maintaining that same level of focus on flexibility that helped us navigate the quarter as we focus on winning during the reopening phases,” Quincey said. “Thankfully, a good starting point matters. As a system, we went into the crisis in a strong position and the system has rallied. There is a sense of optimism about what is possible as we move forward. Importantly, we are leveraging the crisis as a catalyst to accelerate the business transformation that was already underway.”
In North America, revenue fell 16% to $2.65 billion, while growth in the juice and dairy categories was “entirely offset” by declines in its fountain and away-from-home businesses. Unit case volume declined 16%, however the Fairlife and Simply brands reported “solid” growth. Operating income fell 31%.
Quincey said Coke is accelerating its long term growth strategy, including refining its product portfolio to put more support behind high performing brands, such as Coke Zero Sugar, and discontinuing numerous “zombie” products. He noted that of the company’s over 400 master brands, more than half are “single-country brands with little to no scale” that make up a combined 2% of total revenue.
One such brand, he said, is juice line Odwalla, which will cease all operations on July 31. However, Coke will use those resources to focus on scaling brands such as Minute Maid, Simply and Topo Chico. Other fast growing brands include sparkling water entrant AHA, which captured a double-digit retail value share within its first 18 weeks on the market, Quincey said.
“There is no doubt that we faced significant pressures in the second quarter, but we exited the quarter with promising signs that the most challenging period is indeed behind us in much of the world,” Quincey said. “There is still a lot of work to do. There is no doubt the world will be different following the crisis. In many ways, the future is coming at us faster than ever. We are embracing the changes and pivoting our business to take advantage of new opportunities.”