The Coca-Cola Co., Atlanta, reported second quarter 2020 results and provided an update on strategic actions that are positioning the system to emerge stronger from the ongoing coronavirus pandemic. The Coca-Cola system remained agile in the second quarter, with a focus on maintaining a safe environment for employees while also providing necessary products and services to consumers, customers and communities during this unprecedented time, the company says.
"I'm proud of the people of the Coca-Cola system as we continue to adjust and accelerate our strategies in this fast-changing landscape," said James Quincey, chairman and chief executive officer of The Coca-Cola Co., in a statement "We believe the second quarter will prove to be the most challenging of the year; however, we still have work to do as we drive our pursuit of 'Beverages for Life' and meet evolving consumer needs."
The company report that net revenues declined 28 percent to $7.2 billion. Organic revenues (non-GAAP) declined 26 percent. Revenue performance included a 22 percent decline in concentrate sales and a 4 percent decline in price/mix. The revenue declines were primarily driven by pressure in away-from-home channels, which represent approximately half of the company’s revenues, it says.
The company lost value share in total nonalcoholic ready-to-drink (NARTD) beverages as an underlying share gain was more than offset by negative channel mix due to pressure in away-from-home channels, where the company has a strong share position.
Since the company's last earnings update in April, global-unit-case-volume trends have improved sequentially, from a decline of approximately 25 percent in April to a decline of approximately 10 percent in June. Unit case volume for July month-to-date was down mid-single digits globally. Performance has been driven by improving trends in away-from-home channels, along with sustained, elevated sales in at-home channels.
The improvement in away-from-home trends during the quarter closely correlated with the easing of lockdowns, and the company expects this correlation to continue in the second half of 2020. Although the company believes the second quarter will be the most severely impacted quarter of the year, given the ongoing uncertainty surrounding the coronavirus pandemic and levels of lockdown, the ultimate impact on full year 2020 results is unknown. The company's balance sheet remains strong, and the company is confident in its liquidity position as it continues to navigate through the crisis, it says.
Despite the high degree of uncertainty, the company is committed to emerging stronger by gaining share and consumers, maintaining strong system economics, strengthening its reputation with stakeholders and positioning the organization to win in the new reality.
The company is accelerating its strategy to accomplish these goals. This includes focusing investments against a defined growth portfolio by prioritizing brands best positioned for consumer reach and share advantage. The company will also streamline the innovation pipeline against initiatives that are scalable regionally or globally as well as maintain a disciplined approach to local experimentation in order to further strengthen the company's leader, challenger and explorer framework. The portfolio will be supported by a refreshed marketing approach, with a step-change in marketing investment effectiveness and efficiency. The company also will lead the Coca-Cola system in driving system-wide efficiencies to support these investments, and will invest in new capabilities to capitalize on emerging, lasting shifts in consumer behaviors.
In the midst of unprecedented challenges, the company remains grounded in its purpose. For example, The Coca-Cola Foundation has partnered with the world’s largest humanitarian network, the International Red Cross and Red Crescent Movement, to help provide hospitals with critical medical equipment and supplies; to support community relief programs; and to fund public coronavirus education and awareness campaigns. The partnership has supported programs in more than 60 countries, reaching an estimated 7.5 million people impacted by the pandemic, the company says.
Additionally, the company recently announced plans to roll out a new pouring option to meet consumer needs with its latest Coca-Cola Freestyle technology innovation — contactless, mobile pouring using a smartphone. As the coronavirus pandemic continues to reshape consumer behaviors, the contactless Coca-Cola Freestyle solution allows consumers to choose and pour drinks in just a few seconds, without creating an account or downloading an app, it says. The mobile experience is rolling out to Coca-Cola Freestyle dispensers across the United States by the end of the year.
The company also is taking a multi-faceted approach to social justice, focusing on listening, leading, investing and advocating. This includes meeting with stakeholders, employees and other business leaders. The company has paused social media activity for July to review policies, including its own, and to hold partners to a higher level of accountability and transparency, it says. The company has committed to spend an incremental $500 million with Black-owned suppliers over the next five years in the United States. In support of social justice, The Coca-Cola Foundation has contributed $4 million to several initiatives and, to date, the company has contributed an additional $1.3 million through brands Coca-Cola and Sprite.