Coca Cola Cuts Jobs as Demand for Sugary Soda Goes Flat
27 Apr 2017 --- The falling demand for fizzy drinks has hit Coca-Cola as the soft drinks giant posts its first quarter results and also announces 1,200 job losses. As global consumers continue to opt out of sugar sweetened soda in favor of healthier choices and a general change in tastes and preferences continues to sweep across many food and drinks sectors, growth is stalling at Coca Cola.
In an announcement yesterday (Apr 26), Coca Cola said its global carbonated drink sales fell 1% in the quarter to 31 March, while non-carbonated drinks are driving sales in North America.
The job cuts will start to happen in the second half of this year and into 2018.
Coca Cola’s position reflects what is happening generally in the soft drinks industry as it comes to terms with slower growth which can then lead onto cost cutting exercises – just like announcing job losses.
Coca Cola is increasing its cost-cutting target by US$800m in annualized savings, and expects to save US$3.8bn by 2019.
However, company chairman and chief executive Muhtar Kent – who makes way for James Quincey next week – insists that the Q1 performance is what was expected.
"The first quarter performance was in line with our plan, and we remain on track to deliver our underlying revenue and profit targets for the full year. As anticipated, revenues in the quarter were adversely impacted by two fewer days and the shift of the Easter holiday,” he says.
“Most importantly, we continue to execute against the long-term strategic transformation plan for the Company – a plan that I am confident will deliver even greater shareowner and stakeholder value in the years to come."
"Next week I will proudly hand over the CEO reins to James Quincey with full confidence that he will complete the Company's transformation and lead our aggressive growth agenda. His vision of accelerating The Coca-Cola Company's evolution into a total beverage business with a focus on driving sustainable growth across a broad portfolio is exciting for all stakeholders, and he has my full support," Kent continued.
President and Chief Operating Officer James Quincey said how Coca Cola is evolving to make changes that will result in a more “consumer-centric” portfolio that keeps pace with changing taste and preferences which primarily means cutting out or reducing sugar.
“Importantly, these portfolio changes will help our consumers moderate the amount of added sugar they consume. In addition, as we approach the end of our refranchising and implement our new, more agile operating model, we are expanding our productivity program.”
“Our revamped portfolio, a stronger global bottling system, and a leaner enterprise structure will allow us to capture an increasing share of the vibrant value growth available in the beverage industry and to deliver value for our shareowners.”
“It will be an honor and a privilege to lead the organization as CEO, and I look forward to working with our people around the world to accelerate our growth."
Other key results for the first quarter include Coca Cola’s net revenues declining 11%, reflecting unfavorable impacts from structural changes of 10% and foreign currency of 1%, while organic revenues (Non-GAAP) were even, which included the impact of two fewer days in the reporting calendar and the shift of the Easter holiday.
Meanwhile, price/mix grew 3% with balanced contribution across the operating segments and the operating margin and comparable currency neutral operating margin (Non-GAAP) expanded more than 90 basis points and more than 220 basis points respectively.
Coca Cola also reported EPS of US$0.27 and Comparable EPS (Non-GAAP) of $0.43 and says it is on track to deliver full year organic revenue (Non-GAAP) and comparable EPS (Non-GAAP) targets.
