Coronavirus (COVID-19): Coca-Cola European Partners spotlights demand changes

Jon Wright
Head of Insight - RA EMEA
@RetailAnalysis

Date : 06 May 2020

Announcing its first quarter results, Coca-Cola European Partners discussed the challenges its country operations were facing given the shifts in demand.

1. Challenging to predict demand

The company noted while the switch to more at home occasions had supported sales, the trading had been ‘volatile’. CCEP noted that while volumes had benefited from household stocking initially, this had fallen away after. The volatility in its trading had seen volume sales ‘ranging from minus 10 to plus 5 per cent’.

In the short term, though, CCEP said it believed shoppers stocking up was beginning to unwind and it had since seen an unwinding in buying patterns as households worked through what they had bought. This, it said, was being accentuated by declining traffic at the stores it stocks due to ‘the severity of social distancing measures… resulting in fewer physical shopping trips overall’.

The challenges caused by shifting demand patterns also affected high periods of demand CCEP was expecting. Given shoppers have been required to stay at home, Easter celebrations were limited in most of its markets. This meant the company did not benefit ‘from the usual uplift from Easter in April’.

2. Online growth has not been maintained

In contrast with some other suppliers who have reported results in recent weeks, CCEP said it had seen a ‘significant spike in shopper demand for online grocery across all [its] markets’. However, the company said this had ‘moderated’, again suggesting that the spike was more to do with purchasing being brought forward, rather than part of an on-going trend.

The company said it had worked with retailers to help them minimise out-of-stocks given the pressure on meeting online demand and maintaining stock levels in-store. For some of its larger retailers CCEP said it had looked to make the process more efficient.

3. Range optimisation driving efficiency, but allowing for NPD

The pandemic has impacted on shopper demand, which has led to CCEP to ‘prioritising core SKUs in larger multipack can and large PET packs’. The step has seen it reduce the number of SKUs it produces by a third, while it noted it would continue to review the remaining SKUs to see if there are opportunities to reduce the number further.

CCEP said it had seen an ‘increased productivity on some of [its] lines as its simplified [the] range’. While it expected some of the SKUs to come back into its range as the effects of the pandemic lessen, it was not expecting all to come back. However, CCEP noted the importance of maintaining focus on new products in its range. It highlighted the growth it had seen with some of its newer brands, notably Costa, Tropico and Coke Energy.

4. On the go sales impacted across channels

CCEP said its sales had been impacted during the quarter with the away from home channel accounting for 39% of volume sales and 43% of value sales at a group level. However, it noted how about 30% of its immediate consumption packs are ‘usually sold through the Home channel via front-of-store, on-the-go concessions and supermarket convenience formats’. This was particularly the case for its water brands, where sales skew towards small, single serve packs.

5. Sustainability remains key

Despite the operational challenges being caused the pandemic and the potential economic headwinds to come, the company underlined the importance of its sustainable initiatives. Indeed, it said it remained ‘focused on accelerating our sustainability agenda’. Indeed, the company said that in the quarter Sweden had become the first ‘100% rPET market as [it continued to work] towards a circular economy for packaging’.

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