We look at the commercial actions The Coca-Cola Company is taking in response to the coronavirus pandemic.
Changing consumer spending patterns
As part of its Q1 results announcement, the company withdrew its previous guidance for the full year. Coming into the quarter it was delivering sold volume growth of 3%, excluding China. However, as the pandemic spread globally, it experienced a significant change in consumer spending patterns. This included a major decline in away-from-home spending, stocking up in food retail and accelerated ecommerce growth, as stay at home mandates and social-distancing practices came into force.
Global volume down 25%
Given that the out-of-home channel represents around half of the company’s revenues it is expecting a significant impact on its second quarter results. Since the start of April, it has seen global volume fall 25%, with most of the decline coming from its away-from-home business. This includes eating and drinking channels and on-the-go channels such as convenience. In some markets, such as India, social-distancing measures have also impacted at-home sales.
In response the trading environment and its anticipated evolution, it is adapting its business strategy as follows:
- Product supply - ensuring adequate inventory in key channels, prioritising core brands and pack formats, simplifying supply chains and temporarily eliminating the long-tail of products
- Brand visibility - improving availability and visibility in retail stores through redeploying teams
- NPD - reshaping the innovation pipeline to focus on larger, scalable solutions for the current trading environment
- Ecommerce - investing in ecommerce to support retailers and meal delivery services, increasing in-app visibility with a focus on multi-packs. It is also piloting different B2B and B2C digital models to capture demand for at-home consumption
- Pack formats - shifting towards pack formats that are relevant for online sales, including providing alternatives to fountain drinks for its foodservice customers
- Marketing - redeploying consumer and trade promotions towards digital, noting that broad-based brand marketing has limited effectiveness in the current trading environment
- Cost control – including reducing marketing and trade spend, challenging operating expenses and pausing non-essential capital expenditure
- Downturn planning - preparing for a stronger consumer focus on affordability, including a continued emphasis on revenue growth management
- Business agility - maintaining flexibility for three potential recovery scenarios; V, U and L-shaped. While it anticipates a U-shaped recovery, the business is also ensuring that it is prepared for a faster recovery or a more prolonged economic slowdown
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