Coke: Q1 Results Reflect ‘Asynchronous’ Pandemic Recovery

Having struggled throughout 2020 with strong headwinds from the pandemic, The Coca-Cola Company saw net revenues increase 5% in the first quarter of 2021, with top line growth beating analysts’ expectations as volume sales are beginning to recover from last year’s lockdowns.

According to the company’s Q1 earnings report today, global unit case volume trends “remain closely linked to consumer mobility,” which has begun to increase thanks to rising vaccination rates. However, as the vaccine rollout varies from country to country, the company anticipates an “asynchronous” recovery.

“There are clear opportunities to reaccelerate share positions as the recovery plays out and we’ll invest to drive momentum with focus and flexibility,” CEO James Quincey said during this morning’s earnings call. “In the market at the forefront of the recovery, we’ve seen early signs that our actions taken during the pandemic are helping us outpace recovery.”

Organic revenues grew 6% and operating income was up 14% in the quarter. Operating margin was 30.2%, compared to 27.7% last year. Earnings per share declined 19% to $0.52. Cash from operations was $1.6 billion, up from $1.1 billion in the previous year. Free cash flow was $1.4 billion, up from $1.2 billion.

Global volume sales in March returned to 2019 levels, according to the report, with increases in at-home channel sales remaining offset by continued challenges in on-premise accounts leading to a decline in value share in the total non-alcoholic RTD beverage space. CSDs grew 4%, driven by growth in China, India and Latin America, with trademark Coca-Cola up 4% and Coca-Cola Zero Sugar increasing 8%. Juice, dairy and plant-based beverages — including Simply and fairlife — were up 3% in the quarter.

But total beverage sales were offset by declines in the hydration category, which fell 12% across all markets. Sports drink fell 1%, partially offset by strong performance in premium offerings and zero-calorie lines in North America. Tea sales dropped 6% and coffee was down 21%, largely due to pandemic-related challenges for Costa’s international retail stores.

In North America, unit case volumes fell 6%. Price/mix grew 4%, driven by solid improvements in juice and dairy. Operating income grew 105%.

According to Quincey, the company has leveraged packaging formats such as single-serve multi-packs to help drive at-home sales and an emphasis on quickly scaling new innovations. In the quarter, Coke launched several new products including smartwater+ line of infused beverages and made a broader push on the Coca-Cola with Coffee line in the U.S. In international markets, the company rolled out a reformulated version of Coca-Cola Zero Sugar intended to more closely match the flavor of the core Coca-Cola product.

“We’re using machine learning and AI tools to stay on top of rapidly evolving consumer trends and identify emerging needs,” Quincey said. “Our dedicated digital transformation structure is leading to strong online-to-offline growth. We’ve seen ecommerce share gains in key advanced markets like North America, Japan, and Great Britain. And in markets like Turkey, where the channel is still developing, we more than tripled sales and gained almost 10 points of share versus last year.”

The company also increased its focus on strengthening its relationship with its bottling partners, working to “optimize cooler placement” and improve customer service, Quincey said, adding that the company is “leveraging our platform services organization to scale our collective data, marketing, digital and supply chain capabilities.” As well, the company today announced its intent to tak its Coca-Cola Beverages Africa (CCBA) bottling operation public, filing a Form 8-K with the U.S. Securities and Exchange Commission, signalling an increased focus on the African market.