NEW DELHI: Beverage major Coca Cola has suffered its steepest quarterly revenue decline in at least 25 years. The company on Tuesday said that closure of restaurants, theaters, and sporting venues due to the COVID-19 pandemic has pushed its second-quarter sales down 28 per cent year-on-year to $7.2 billion.
Unit volume, a key measure that indicates demand, declined 16 per cent with Asia Pacific region seeing a 18 per cent plunge primarily due to the strict nationwide lockdown in India, Chief Executive James Quincey said.
"It was one of the toughest quarters for us... Soft drinks declined 12 per cent led by a decline in India, Western Europe and the fountain business in North America due to pressure in away-from-home channels. Brand Coca-Cola declined 7 per cent and Coca-Cola Zero Sugar declined 4 per cent in the quarter while growing 2 per cent year to date," Quincey said.
For the company, India is the fifth largest market. Coca-Cola generates a sizeable portion of its revenues by selling its soft drinks and concentrates to restaurants and theater operators. The coronavirus-induced lockdown imposed late March in India impacted sales severely but globally, the company is seeing improving demand as lockdowns ease.
"As lockdowns eased, unit case volume trends improved sequentially, from a decline of about 25 per cent in April to a fall of about 10 per cent in June," Quincey told in a post-earnings conference call.
Net income stood at $1.8 billion for the April-June period, down 32 per cent from the same period a year ago.
Other segments such as juice, dairy and plant-based beverages declined 20 per cent driven by pressure in the Asia Pacific and Europe while the water, enhanced water and sports drinks declined 24 per cent led by Asia Pacific. Besides, its tea and coffee segment declined 31 per cent.
Bottling Investments, which represents products sold to its bottling partners who distribute them to retailers and distributors, were hit even harder. "Unit case volume declined 36 per cent driven by India and South Africa due to the impact of the coronavirus," the Atlanta-based beverage maker said in an earnings release.
As it tries to emerge from the crisis stronger, the soda giant plans to shift its marketing spends to biggest brands -- including Coke, Coke Zero Sugar and Sprite -- and eliminate small underforming brands around the world, Quincey said, adding that more than half of its 400 brands are single-country brands with little to no sale.
While Coca Cola expanded beyond its eponymous drink to enter into energy drinks and other beverages, it has avoided food. Rival PepsiCo Inc, which also reported a fall in beverage sales, beat quarterly revenue estimates helped by a boost in at-home consumption of snacks.
In India, however, snacks volumes declined in “double-digit" as supplies were disrupted in the first phase of the lockdown. "Snacks volume grew 117 per cent, primarily reflecting a 124-percentage-point impact of the Pioneer Foods acquisition, mid-single-digit growth in the Middle East and Pakistan and low-single-digit growth in South Africa, partially offset by a double-digit decline in India," PepsiCo had said in a statement.